Social Security Gap Widens as Retirement Costs Surge

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 financial security. The truth is, while Social Security retirement benefits provide valuable support, most of us will need personal savings to maintain our lifestyle in retirement. Currently, the average Social Security retirement benefit is just $1,929.20 per month, yet the average retired household spends about $4,581.25 monthly. That’s a significant difference that can cause real stress when planning for retirement income.

If you’re part of Generation X, you’re not alone in your concerns about Social Security. About 80% of your peers worry the program won’t be there when they need it. Let’s work through the realities together so you can feel more confident about your retirement planning.

Key Takeaways

• Social Security typically replaces only about 40% of your pre-retirement income, not your entire financial needs.
• Personal savings are usually necessary to fill the gap between Social Security benefits and actual living expenses.
• Saving 10%–20% of your income, using tax-advantaged accounts, and thoughtful investing can help build your retirement security.
• Waiting to claim Social Security and coordinating with your spouse can help maximize your Social Security benefits.
• While Social Security faces challenges, it’s unlikely to disappear completely, though benefits may be reduced after 2033.

How Social Security Retirement Benefits Work

After contributing to Social Security for at least 10 years, you become eligible for retirement benefits starting at age 62. Your monthly payment is based on your primary insurance amount (PIA), which reflects your earnings during your 35 highest-earning years. In simple terms, higher career earnings generally lead to higher Social Security benefits, though there are limits.

Starting Social Security benefits at 62 means receiving only 70%–80% of your PIA, depending on when you were born. For every year you wait beyond that—up to age 70—your benefit grows significantly. For those born in 1943 or later, this increase is a meaningful 8% per year.

You’ll receive 100% of your PIA at your full retirement age, which ranges from 65 to 67 depending on your birth year. Waiting until 70 can increase your Social Security benefit to 115%–132.67% of your PIA, which can make a real difference in your financial security.

You may also be able to claim up to 50% of your spouse’s PIA through Social Security spousal benefits, depending on your age when you retire. To qualify, 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 Social Security benefits if your marriage lasted 10 years or more.

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

The Limitations of Social Security Benefits

I know it can be difficult to hear, but Social Security benefits are designed to replace only about 40% of your pre-retirement income. Relying solely on these benefits often creates a financial gap that can cause stress and hardship.

Inflation can make this challenge even more difficult. 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 calculation is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which may not accurately reflect the typical expenses retirees face. When costs rise faster than the COLA, your purchasing power decreases over time. A recent study found that while COLAs increased Social Security benefits by 78% between January 2000 and February 2023, typical retiree expenses rose by 141% during the same period.

The Importance of Personal Savings

Because Social Security likely won’t cover all your needs, building personal savings is crucial for your peace of mind in retirement. With traditional pensions becoming rare, most of us now need to take a more active role in preparing for our future financial security.