Social Security's payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently it replaces only about 40 percent of a worker's average wage from the year prior to retirement. That is simply not enough money to live on when it is your primary -- perhaps your only -- source of retirement income.
What does that mean to you? The average household in America earns about $50,000 x .40 = $20,000 / 12 = $1,666 in monthly Social Security Income after 40 years of working.
Facts you should know:
1. Hundreds of millions of retired Americans survive solely on Social Security.
2. The average retired couple jointly recieves about $2,400 a month income from all investments.
3. An average earner who retired at age 65 in 2002 gets benefits that replace 40 percent of his pre-retirement income. By 2030, this will fall to 28 percent due to a higher normal retirement age, higher medicare deductions, and income taxes levied on Social Security benefits."
4. Private sector employers have quit providing pensions, and state and local government's public pensions are drastically underfunded.
5. The average age when current retirees were forced out of the workforce is age 59 due to downsizing. USA Today 7/26/2006
6. As of 2005, just 60% of 60-year-olds, 32% of 65-year-olds and 19% of 70-year-olds were employed, according to the Bureau of Labor Statistics.
Current retirees cited two primary reasons for quitting sooner than planned:
-Illness: About 47% of current retirees who retired earlier than planned were forced to stop working because of health problems. -Unemployment: 44% percent of current retirees who retired earlier than planned blamed job loss or downsizing.
7. A younger worker is more than 40% more likely to be called for an interview than a worker 50 or older, according to the 2005 study done through the Center for Retirement Research at Boston College.
8. The latest census figures indicate that only one in every ten Americans today is financially prepared to retire when they reach age 65. Here are a few other facts on retirement gathered from a variety of sources.
-Forty-seven percent of U.S. households are not covered by either a defined benefit or defined contribution plan (The WEFA Group). Twenty-five percent of employees who qualify for 401(k) plans do not contribute to them (an estimate from Buck Consultants).
-At the end of WWII, there were 42 workers paying into Social Security for each person receiving benefits. Today, barely three people contribute for each recipient. Projections are that by 2030, when most baby boomers will have retired, just two working people will contribute for each person receiving benefits (Social Security Administration, Trust Funds Report, 1992).
-Social Security benefits will replace only 16% of the income of married couples earning $50,000 to $100,000 and only 9.5% of the income of married couples earning $100,000 and only 9.5% of the income of married couples earning $100,000-plus (Office of Research and Economic Analysis, Pension and Welfare Administration).
-Sixty-nine percent of American adults aged 25 to 44 expect to retire in the "traditional" sense of spending retirement in leisure. But reality hits home as they near retirement-63% of 45- to 54-year-olds expect a retirement of leisure, and only 49% of those 55 or older say the same (Aetna Life Insurance and Annuity Co.).
-Working people tend to think their retirement lifestyle will be better than their current lifestyle, but retirees report their standard of living has declined. Example: Twenty-six percent of workers say they are "just making ends meet," but only 16% think they will live this way in retirement. Of retirees, 20% are "just making ends meet," while 16% describe their pre-retirement lifestyle this way (Employee Benefit Research Institute).
-A Baby Boom Retirement Savings Index, published each year by Merrill Lynch, shows that as of November '94, baby boomers were saving only 38.2% of what they will need to maintain growth-adjusted living standards in retirement. The index is basically unchanged in the three years the index has been published (Merrill Lynch Strategic Planning).