How Much Could Social Security Add to Retirement Income for Middle-Class Retirees?

Social Security is a crucial part of retirement planning, especially for middle-class retirees who rely on it to help cover living costs.

Still, anyone treating it as the main source of income after work may want to review the numbers more closely.

U.S. Census Bureau data shows the national median income for all households was $87,460. That figure varies widely depending on factors such as household type, education, age and ethnicity.

Using AARP’s Social Security calculator, a 55-year-old earning that median pre-tax income and claiming benefits at 62 would receive an estimated monthly check of about $2,155, or $25,680 a year.

That amount is not far above the U.S. Department of Health and Human Services’ poverty line of $15,650. The gap becomes even more important when debt, health care costs or future long-term care needs enter the picture.

There is also a significant difference between that projected $25,680 in annual Social Security income and the $87,460 median salary, leaving a shortfall of $61,780.

Using the standard 4% withdrawal rule, a retiree would need about $1,544,500 in savings to preserve the same standard of living.

Benefit amounts can vary considerably, but one major factor is how long a person waits before claiming. Some planners argue that retirement income plans should not depend too heavily on Social Security, given ongoing concerns about the program’s long-term stability.

Ways to increase Social Security income

Getting the most out of Social Security requires planning, patience and a solid understanding of how the system works.

Middle-class retirees can use several strategies to improve their benefits:

Wait to claim benefits

Although claiming early may work for some people, delaying benefits is usually the most effective way to increase monthly payments.

Benefits can begin at 62, but starting then reduces the monthly amount. Waiting each year until age 70 can meaningfully increase the payment. Based on the same AARP calculator, someone who waits until 70 could receive about $3,817 per month, or $46,452 annually.

Under the 4% rule, that higher benefit would reduce the savings needed to bridge the gap to roughly $1,025,200.

Another important issue is taxation, since Social Security benefits are taxable in many cases.

Think about taxes

Whether Social Security is taxed depends on total retirement income. Pensions and investment withdrawals can all affect how much of a benefit is taxable, so tax planning can help reduce what is owed.

A recent law also created additional tax relief for some retirees, particularly those in the middle-income range.

People age 65 and older can now claim a bonus tax deduction of $6,000 for single filers or $12,000 for joint filers. This comes on top of the standard deduction and could shield a large portion of income from federal taxes.

However, those provisions are temporary and are scheduled to expire after the 2028 tax year. Using them effectively requires careful planning to avoid missing deductions or making costly filing mistakes.

This matters even more for retirees with portfolios of $250,000 or more, where tax decisions become more strategic.

Working with a financial advisor can help reduce expensive errors. Services such as WiserAdvisor can connect people with vetted professionals who focus on this type of planning.

How it works:

1. Share your goals: Provide a few details about your savings, retirement timeline and investment portfolio.

2. Get matched for free: WiserAdvisor searches its network to connect you with up to three vetted advisors who fit your needs.

3. Consult for free: You can schedule a no-obligation consultation to decide which advisor is the right fit for your long-term goals.

Note: WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.

Look beyond Social Security

Even though maximizing Social Security matters, it should be only one part of a broader retirement plan. Relying on it alone may not provide enough income, since the program works best as a supplement rather than a full replacement for retirement savings.

There is also concern about the future of the main trust fund that supports benefits. According to the Committee for a Responsible Federal Budget, retirees who depend entirely on Social Security could face a 28% benefit cut if the trust fund is depleted.

That makes it more important than ever to treat Social Security as a bonus rather than the foundation of retirement security.

Here are a few options worth considering.

Use real estate to diversify

Residential and commercial real estate have long been popular ways to diversify a portfolio and add stability, especially when saving for retirement.

New investing platforms have made access to real estate easier.

Arrived, a platform backed by investors including Jeff Bezos, offers SEC-qualified real estate opportunities such as rental homes, vacation rentals and diversified funds.

Besides potential property appreciation, Arrived can also generate passive income without the work of managing tenants or handling repairs.

Investors can sign up, review selected properties and start with as little as $100.

Users can access more than 596 properties across 67-plus markets. After a property is fully funded, investors may also use Arrived’s secondary market after six months if they want to rebalance their portfolio.

For a limited time, new investors can also receive a 1% account match when they open an account and add $1,000 or more.

Real estate opportunities are not limited to residential property. Investors with available capital can also look at other parts of the market that offer different diversification benefits.

One option is Lightstone DIRECT, which gives accredited investors access to industrial and retail deals, as well as multifamily opportunities.

Lightstone DIRECT allows individual investors to access the approach used by Lightstone, one of the largest privately held real estate investment firms in the U.S., with $12 billion in assets under management.

Over nearly four decades, Lightstone has reported strong risk-adjusted results, including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.

Each opportunity requires a minimum investment of $100,000 and is reviewed by Lightstone’s principals, including founder David Lichtenstein.

The firm also invests at least 20% of its own capital in every deal, roughly four times the industry average, which helps align its interests with investors.

Consider gold

Gold is another commonly used hedge. The precious metal is often seen as a safe-haven asset that can help make a portfolio more resilient.

The basic idea is that, unlike paper currency, gold cannot be created at will by central banks, so it may hold value better during inflationary periods and downturns.

For retirees who want gold in their portfolio, a gold IRA is one way to hold the asset within a retirement account.

One option is to open a gold IRA with help from Priority Gold.

Gold IRAs allow investors to hold physical gold or gold-related assets inside a retirement account, combining IRA tax advantages with the potential protective benefits of gold.

To learn more, investors can request a free information guide that includes details on how to qualify for up to $10,000 in free silver on eligible purchases.

Keep cash available for emergencies

Retirees should also keep some cash liquid outside of annual retirement-account withdrawals. Having to tap retirement savings during a medical emergency can damage long-term security, which is why a strong emergency fund remains a common piece of investing advice.

A high-yield account such as a Wealthfront Cash Account can help grow uninvested cash while still keeping it accessible when needed.

The Wealthfront Cash Account currently offers a base APY of 3.55% through program banks. With a new-client boost and direct-deposit incentive, referred clients can earn up to 4.55% APY.

That is 10 times the national deposit savings rate, according to the FDIC’s latest report.

With no minimum balance or account fees, plus 24/7 withdrawals and free domestic wire transfers, the money remains easy to access. Funds are also eligible for up to $8 million in FDIC insurance through program banks.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

U.S. Census Bureau (1); AARP (2); U.S. Department of Health and Human Services (3); Hartford Funds (4); The Committee for a Responsible Federal Budget (5)