A new report from NFP shows a trend that worries many retirement planners. Nearly half of older American workers now expect to rely primarily on Social Security for their income in retirement. This figure climbs as workers age, jumping from just 12% for those under 35 to 41% for those 55 and older.
The Social Security Administration notes that the trust fund is designed to replace only about 40% of average earnings from working years. Financial experts argue that relying on this single source is a risky strategy. The National Council on Aging warns that for most people, the benefit amount will not be enough to cover basic living costs.
Despite these warnings, the math of retirement remains a point of contention. While industry reports often cite a magic number like $1.2 million to ensure comfort, many Americans reach retirement age with far less. Recent surveys indicate that the typical retiree holds about $126,000 in household savings, yet large majorities still report that they are living comfortably or doing okay financially. This gap between expert advice and the experiences of current retirees creates significant anxiety for those still in the workforce.
Certain factors change the equation for individual retirees. Social Security benefits are progressive, meaning they replace a much higher percentage of earnings for lower-income workers. Furthermore, retirees who have paid off their mortgages or have reduced monthly expenses often find they can manage on their benefits alone. However, this does not eliminate the struggle for millions of others. There are 9 million older adults currently living on less than $20,000 annually, and many are forced to make difficult decisions regarding rent and essential medications.