Social Security Benefits Fall Short as Retirement Costs Soar

Bridging the Gap Between Savings and Social Security: What You Can and Can’t Count on

I understand how overwhelming retirement planning can feel, especially when you’re trying to figure out if Social Security will be enough for your future needs. The truth is, while Social Security provides valuable support for millions of Americans, it likely won’t cover all your retirement expenses. As of January 2025, the average monthly Social Security benefit was just $1,929.20, yet the average retired household was already spending $4,581.25 monthly by 2022.

This significant gap between Social Security benefits and actual living costs is particularly concerning for many of you in Generation X, with 80% worried the program might not be there when you need it. Let’s work through the realities together so you can better prepare for your financial future.

Key Takeaways

• Social Security typically replaces about 40% of your pre-retirement income, not your entire financial support.
• Your personal savings will likely be needed to fill the gap between Social Security benefits and actual living expenses.
• Saving 10%–20% of your income, using tax-advantaged accounts, and thoughtful investment choices can help build your retirement security.
• Waiting to claim Social Security and coordinating with your spouse can help reduce how much you need to save.
• While Social Security faces challenges, it’s not likely to disappear completely, though benefits might be reduced after 2033 when reserves are projected to run low.

How Social Security Retirement Benefits Work

You become eligible for Social Security retirement benefits after contributing to the system for at least 10 years. Once eligible, you can begin receiving monthly payments starting at age 62.

Your benefit amount is based on your primary insurance amount (PIA), which is calculated from your 35 highest-earning years. In simple terms, the more you earn during your working years, the higher your Social Security benefit will be, up to certain limits.

If you start collecting Social Security at 62, you’ll receive only 70%–80% of your PIA, depending on when you were born. For each year you wait beyond that—up to age 70—your benefit grows significantly. For those born in 1943 or later, this increase is a substantial 8% per year.

Your benefit reaches 100% of your PIA at your full retirement age, which ranges from 65 to 67 depending on your birth year. If you can wait until 70, those with maximum earnings who delay retirement until 70 could receive up to $5,108 monthly.

You may also be able to claim up to 50% of your spouse’s PIA, depending on your age when you retire. To qualify for Social Security spousal benefits, you need to:

• Have been married for at least one year
• Be at least 62 years old or have a qualifying child in your care

Important

A qualifying child is under 16 or receives Social Security disability benefits. If you’re divorced, you may still qualify for benefits if your marriage lasted 10 years or more.

Social Security benefits vary widely based on lifetime earnings and when you retire. In 2025, lower-income retirees who worked at least 30 years and retire at full retirement age can receive a special minimum benefit of $1,093.10 monthly. At the other end, those with maximum earnings who delay retirement until 70 could receive up to $5,108 monthly.

The Limitations of Social Security Benefits

I know many of you hope Social Security will cover most of your retirement needs, but it’s important to understand that these benefits are designed to replace only about 40% of your pre-retirement income. This often creates a significant shortfall for many retirees.

Inflation can make this gap even more challenging. While the Social Security Administration does provide cost-of-living adjustments (COLAs), these increases don’t always keep up with the actual expenses you’ll face in retirement.

The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, which might not accurately reflect the typical expenses retirees encounter. When costs rise faster than these adjustments, your purchasing power decreases over time.

A 2023 study found that while COLAs increased Social Security benefits by 78% between January 2000 and February 2023, typical retiree expenses grew by 141% during the same period. This means many retirees have been falling behind despite receiving regular increases.

The Importance of Personal Savings

Since Social Security likely won’t be enough to maintain your lifestyle in retirement, developing additional income sources is crucial. With traditional pensions becoming rare, most of us now need to take a more active role in building our retirement security through personal savings.