Can You Retire on Social Security Alone?

Funded by the Federal Insurance Contributions Act (FICA) tax withholdings from your earnings, Social Security retirement benefits act as a safety net to replace your working income and help you pay for your living expenses. But as of 2021, the Social Security Administration (SSA) reported that the average benefit for a retiree was ​$1,555​ and that very few recipients used this source for at least ​90 percent​ of their retirement earnings. Whether you'll be able to retire on Social Security alone will depend on your future cost of living, preferred lifestyle and the specific payment amount you'll be due upon your chosen retirement age.

To understand how much of your income Social Security might replace, consider how the benefits get calculated. First, you'll need to have worked at least ​10 years​ to qualify at all. The SSA will then look at the ​35 years​ during which you had your highest earnings and apply a formula to determine your potential payment at full retirement, which is between age ​66 and 67​, depending on your birth year.

You can retire as young as ​62​, but this means seeing your monthly benefits cut anywhere from ​25 to 30 percent​. Retiring as late as ​70​, however, means you can get an increase in your benefits by up to 8 percent each year. Cost-of-living adjustments will also apply annually and add to the amount you receive in Social Security payments by direct deposit or debit card.

To learn more about your potential benefits based on your lifetime earnings record, you can get a "my Social Security" account through the SSA website. This will require providing your Social Security number and other identifying details. You'll also be able to access a retirement estimator that will let you account for potential earnings changes and adjustments. You can use the calculator to estimate your spouse's benefits too.

​Consider also​: Are Social Security Taxes Deductible from Taxable Income?

​With your estimated future living costs and Social Security benefits in mind, you'll have a better idea as to whether your Social Security income will suffice for all your needs​

Once you've looked at your benefit estimates, you can identify and add up all the living costs you expect during retirement and see how far your Social Security benefits will get you. Some of the basics include housing, food, utilities and clothing. However, you'll want to include many other items such as transportation, debt payments, health care costs, insurance, recreational activities, hobbies, personal care needs and miscellaneous expenses.

You'll also want to consider any major purchases you might want to make such as paying for your grandchildren's college or buying a vacation property. Also, inflation will factor in and lead to higher costs after retirement.

​Consider also​: Budgeting for Retirement

With your estimated future living costs and Social Security benefits in mind, you'll have a better idea as to whether your Social Security income will suffice for all your needs. You might find that you could be covered as long as you live a modest lifestyle and avoid taking on additional debt, especially if you also have a spouse's benefits to count on. Taking actions such as paying off major debts like mortgages before retirement can help you live more comfortably.

But like many others planning for retirement, you may find that you'll need to utilize other types of income to live comfortably during retirement. While the SSA notes that Social Security benefits typically replace around ​40 percent​ of your income before retirement, Wells Fargo explains that you'll usually need at least ​70 percent​ replaced. You might even need your full income replaced if you plan to live a more luxurious lifestyle.

Long before retirement, you can stash away money in options such as 401(k)s and individual retirement accounts (IRAs) and take distributions alongside your Social Security payments. You can also continue to work a job after you formally retire from working full-time. However, you'll want to keep in mind the SSA's restrictions on income since you can have your Social Security benefits lowered by ​$1​ for every ​$2​ you earn if you have not yet reached your full retirement age and exceed the set earnings limit. The 2021 set earnings limit is ​$18,960​.

​Consider also​: Which Comes First: Saving for a House or Retirement