Are Social Security Benefits Sufficient to Support Retirees?
Although retirement is often referred to as the golden years, several elderly Americans certainly wouldn’t describe this time of their lives in that way.
In fact, research undertaken by the Center for Social and Demographic Research on Aging at the University of Massachusetts in Boston revealed that up to 50% of Americans over the age of 65 who live on their own and around 25% of those in two-person households simply don’t have enough money to cover even the most basic of essential each month anymore.
Measuring Costs with the Elder Index
The Elder Index measures the basic costs that most households have to cover and how well they’re able to afford them. These costs include housing, food, transportation, health care and other basic essentials and don’t take extras into account such as vacations, eating out or entertainment.
Amounts for the Elder Index vary according to an individual or couple’s actual situation. For those who don’t have to pay a mortgage anymore, the Elder Index is just over $21,000 per year for an individual and just under $32,000 for a couple.
The estimates also increase for anyone who’s still renting to around $25,500 for singles and just over $36,000 for couples. Costs for seniors who still carry mortgages rise to around $32,000 for singles and a little over $42,000 for couples. This means that up to half of senior citizens simply cannot afford to cover their basic living expenses from month to month anymore.
Determining Social Security Benefit Amounts
As of January 2022, Social Security Administration has noted that beneficiaries would be receiving a 5.9% increase in payout amounts. This is one of the largest cost of living adjustments that have ever been made to this benefit.
The average monthly Social Security benefit for eligible single seniors will be around $1,565 per month and approximately $3,187 per month for retired couples where both spouses qualify. This equates to around $18,780 and $38,244 per year respectively, which is not nearly enough for recipients to cover basic expenses, let alone any unexpected emergencies that may crop up.
Although Medicare benefits are available to seniors, these may not always cover all medical expenses after retiring either.
Additional Savings are Crucial
Although it may have been possible to live exclusively on Social Security benefits a few decades ago, this is no longer the case – even for seniors who relocate to cheaper cost of living areas. As such, it’s crucial for everyone who is still working to contribute as much as they can comfortably afford towards some form of savings or retirement plans such as an IRA or 401(k).
Even small amounts saved over the course of 20 to 30 years will make a significant difference to a senior’s budget when the time comes to stop working – thanks to the power of compounding interest. If you would like ot learn more about setting aside funds towards your golden years that will allow you to do more than merely get by each month, contact our financial advisors today.