Social Security is a guaranteed income source that can help you pay for expenses in retirement. The percentage of your income that this benefit will replace depends on how much you made while you were working.
But for the average wage earner, it will replace about 40% of their pre-retirement income. The type of life you live after you’ve stopped working will greatly depend on how much you can replace the other 60%.
If you made $80,000 while working, and Social Security replaced 40% of that income, you would get $32,000 in annual payments. Living the exact same lifestyle and not changing anything would require an additional $48,000 from other income sources. Here are three ways you can make up for this gap.
On average it’s recommended that you live off of about 80% of your working income. Reducing your $80,000 salary by 20% would be equal to a $16,000 cut in expenses. And if you could accomplish this, the amount of income that you needed to replace would be $32,000 instead of $48,000.