Let’s say you never get around to saving for retirement. You don’t work for a company that offers a traditional pension (which is no guarantee anymore), so the best you can hope for is a social security check. How bad would that be? The answer, based on Social Security as we know it now, is: It depends. If you didn’t earn much before you retired and you’re married, your lifestyle might not take a huge nosedive. Or it may be really, really, really tight.
A third of people age 65 or over rely on Social Security for 90% or more of their incomes, the Social Security Administration says. For about one out of five people in that age group, or 22%, Social Security checks are the sole source of income. The “replacement rate”—how much of a worker’s income is replaced by Social Security—depends on how much you earn:
**Low-wage earner (average $16,739 annually) SS typically replaces 55.9% of your working pay.
**Medium-wage earner (average $37,198 annually), SS typically replaces 41.4% of your working pay.
**High-wage earner (average $81.467) annually), SS typically replaces 28.9% of your working pay.
Being married is better than being single since two checks are, obviously, better than one. Spouses may receive a check based on their own work records or—if they didn’t work or earned less—checks worth 50% of what their spouses get. That boosts the boosts the replacement rate considerably. Low-wage SS now replaces 83.5% of working pay. Medium wage SS now replaces 61.9% of working pay. And high wage SS now replaces 43.3% of working pay.
Again, one out of five retirees have nothing but their government checks, and many others count on them for the bulk of their living. It’s a tough existence. It is important to plan early for retirement to not get caught in this trap.
Tags: Government, income, lifestyle, pension, Retirement, Social Security
