Retiring on Social Security Alone in 2027 Could Mean Living on $25,000 a Year
Millions of Americans plan to retire on Social Security benefits alone, but the math behind that plan reveals a gap that catches most people off guard before they ever cash their first check.
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A lot of people go into retirement thinking they can get by on Social Security alone. That may be the case if you’re eligible for the program’s maximum monthly benefit, which translates into an annual paycheck of more than $60,000.
But the average Social Security benefit among retirees today is only $2,086. On an annual basis, that’s around $25,000, which probably isn’t enough to cover your expenses. So if you’re looking to retire in 2027 and don’t expect income outside of Social Security, you may want to rethink your plans.
Don’t set yourself up to struggle
Part of the reason so many people mistakenly think they can retire on Social Security alone is that they assume their expenses will shrink magically once they stop working. But in reality, only a few of your costs might be lower, and some may be higher.
If you’re retired, it means you don’t have to commute to work every day, so there may be some savings there. And if you manage to pay off your home by retirement, you can subtract your mortgage payment from your monthly budget.
But many of your core expenses will still be there. You may have to pay for things like:
- Auto and homeowners insurance
- Property taxes
- Utilities
- Food
- Clothing
- Household necessities
- Healthcare
And some of these costs might increase.
Your utility bills might rise due to you being home more during the day. And your healthcare expenses might increase once you move over to Medicare — partly because you may have less comprehensive coverage than on a private employer plan, and partly because you may have more health problems as you age.
When you add up your recurring expenses, there’s a good chance they’ll exceed $2,086 per month. And even if $25,000 a year in Social Security just covers them, there probably won’t be much or any wiggle room for surprise bills like home repairs, car issues, or medical copays. And you may find that you can’t afford to do much for entertainment, either.
You may still have time to make positive changes
If you haven’t saved for retirement and you’re thinking of ending your career next year, you may want to make a change if your only anticipated income source is Social Security and you’re in line for the average benefit. That could mean delaying retirement by a couple of years, which does a few things for you.
First, you might be able to build some savings, even if it’s a small amount. Also, waiting to stop working might allow you to delay Social Security. For each year you hold off on filing past full retirement age, your monthly checks get an 8% boost, up until you turn 70.
If you hold off for three full years beyond full retirement age, you could score a 24% increase. That could leave you with an annual income of around $31,000, as opposed to $25,000, assuming you’re in line for Social Security’s average retirement benefit. And that extra money could make a huge difference in your long-term finances.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
