Social Security Can’t Make You a Millionaire. But Investing This Much Each Month Can

Most seniors in the U.S. would have a hard time retiring without the financial support they receive from their monthly Social Security checks. But they would have an even harder time retiring on their Social Security benefits alone. Those checks aren’t designed to make their recipients millionaires. They probably don’t even cover all of a recipient’s routine expenses.

That’s why personal savings are crucial to staying financially independent. Here’s what you can reasonably expect from Social Security, and how much you should invest starting today to cover the rest.

Image source: Getty Images.

How far does social security go with regard to pensions?

The average monthly Social Security check was $1,918 in June 2024. That’s just over $23,000 per year. Your total lifetime benefit depends on the number of years you claim checks, which depends on your claiming age and life expectancy. Receiving the average check for 20 years would result in a lifetime benefit of about $460,320. The actual amount will likely be slightly higher, thanks to cost-of-living adjustments (COLAs). It could be lower if the government has to cut benefits in the future.

Regardless of the exact amount, it’s safe to assume that most people won’t take home millions of dollars in benefits from their retirement. Still, many workers estimate that their retirement will cost them between $1 million and $2 million.

That means there will be a need for additional sources of retirement income to cover what Social Security doesn’t. There are several ways to go about this, but the most popular is to invest your money in tax-advantaged retirement accounts.

How Much Do You Need to Invest to Retire as a Millionaire?

It is certainly possible to become a millionaire through investing, but the final balance of your nest egg depends on several factors, including how much and how consistently you invest, how long the money stays invested, and your rate of return. Because you can’t control all of these factors, it’s difficult to know exactly how much you’ll earn at your chosen retirement date.

Let’s look at a few scenarios to give you an idea of ​​what you might need to save.

If you start from scratch at age 25 and hope to save $1 million by retirement age 65, you’ll need to put away $311 a month and earn an average annual return of 8% on your investments. But putting that amount away every month isn’t easy, and many people in their 20s aren’t able to save for retirement at that rate.

It’s still possible to reach the $1 million goal even if you wait until age 30 to start. Starting at age 30, you’ll need to save $467 per month, assuming the same 8% average annual return as in the previous example. You’d need $710 per month if you wait until age 35 to start saving.

In a perfect world, you would have no trouble finding the investment funds you need. However, that is not the case for many workers. Contributing enough to a 401(k) to earn an employer match (if you qualify) is one way to increase your contributions. But if that isn’t enough, you may want to consider alternative ways to fund your retirement.

For example, you could take a second part-time job. Or you could delay your retirement. This gives you extra time to save, allows your existing investments to grow (and compound) longer, and shortens the duration and cost of your retirement. You could also use a combination of these strategies.

Figure out what works for you based on what you think you can comfortably save for retirement. Then aim to make regular retirement contributions each month or pay period. And review your investment situation at least annually to see how you’re progressing toward your goals.