Here's something I hear almost every week: "I'll be fine — I have Social Security."
And look, Social Security is important. For many retirees, it's the single largest source of income. But let's look at the numbers honestly.
The average Social Security benefit right now
- Individual: approximately $1,900/month ($22,800/year)
- Couple (both receiving): approximately $3,200/month ($38,400/year)
The average retiree's monthly expenses
Housing, healthcare, food, transportation, insurance, utilities, and a modest lifestyle add up to roughly $4,500 to $6,500/month for a couple, depending on where you live and your health situation.
The math
$3,200/month coming in. $5,500/month going out (using the midpoint). That's a $2,300/month gap — or about $27,600/year — that needs to come from somewhere else.
Three things most people don't realize about Social Security
1. It may be taxable. Depending on your total income, up to 85% of your Social Security benefits could be subject to federal income tax. Many retirees are surprised by this.
2. COLA adjustments may not keep pace. Cost-of-living adjustments (COLAs) are based on the Consumer Price Index. But the CPI doesn't always reflect what retirees actually spend money on — especially healthcare, which tends to rise faster than general inflation.
3. Claiming age matters — a lot. Claiming at 62 vs. 67 vs. 70 can mean a difference of 30-40% in your monthly benefit. Delaying can significantly increase your lifetime income, but you need other income sources to bridge the gap during those waiting years.
Where annuities fit in
An annuity can serve as a "bridge" if you decide to delay Social Security. For example, a period certain annuity could provide income from age 62 to 70, allowing your Social Security benefit to grow to its maximum. After 70, Social Security takes over at a higher amount.
Alternatively, an annuity can supplement Social Security permanently — adding a second layer of income that isn't dependent on market performance.
The point isn't to scare you. It's to make sure you're planning with realistic numbers, not assumptions.
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Author of Indexed Annuity Secrets and founder of Pacific Ridgeway Insurance Solutions in San Diego. Navy veteran. Licensed financial professional, CA #4132743.
Fixed indexed annuities are insurance products, not investments. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. This article is for educational purposes only and is not financial, investment, tax, or insurance advice.