How much more you’d need to save if Social Security went away

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An activist at the offices of Rep. Michelle Park Steel in Cypress, California, on Feb. 24, 2023

Araya Doheny | Getty Images

Social Security is essential to older Americans’ financial security, yet there always seems to be a new headline about how the benefits are at risk.

Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth in New York, said clients ask him how they can prepare for their retirement if Social Security benefits are slashed — or even eliminated.

“We work with a relatively young clientele, and they aren’t too confident today’s system will be the one they inherit when they retire” Boneparth said. “They want to hedge their bets.”

CNBC asked Boneparth, a member of CNBC’s Advisor Council, if he could provide an example of how much more people would need to save if they have to fund their retirement with a smaller Social Security benefit, or none at all.

Workers would need to triple savings

CFP Clifford Cornell, an associate financial advisor at Bone Fide Wealth, provided a scenario of a 30-year-old woman who earns $75,000 a year and already has $20,000 saved for retirement. The woman plans to leave the workforce at age 65 and to spend about $40,000 a year in retirement. Her life expectancy is 90.

In order not to run out of money in retirement, she’d need to save $375 a month in her workplace 401(k) plan — if the Social Security program remains fully in place. Cornell assumed a 6% annual return before retirement and 4% after.

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If Social Security benefits were cut in half, she would need to save $750 a month to not run out of money in retirement, or double the amount based on a fully funded program.

If the program were completely done away with, she’d need to save $1,125 a month, or triple the amount.

Social Security is the main source of income for Americans age 65 and older. With the benefits, about 10% of older adults already live in poverty, according to the Center on Budget and Policy Priorities. The share of older people living in poverty would swell to nearly 40% without the benefits. The average retired worker receives about $1,840 a month.

“The old-age poverty rate would soar if Social Security benefits were cut,” said Richard Johnson, a senior fellow at the Urban Institute. “Millions of seniors would be unable to afford basic needs, like food, shelter and health care. Many seniors would have to turn to their children for financial help.”

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