Counting on social security in retirement? Think again.

The Western retirement model is under strain. Developed nations are growing much older since people live longer and have fewer children. By 2050, the proportion of the world population over the age of 65 is expected to nearly double relative to 2015 rates. This strains the retirement system, as more older people need money and fewer young people put money into the system. France responded by trying to raise the government retirement age from 62 to 64 — but the move has been met with widespread protests.

Big reckoning coming due to low birth rate. Japan is a leading indicator.

— Elon Musk (@elonmusk) March 31, 2023

In the U.S., all workers pay into social security in exchange for the promise that they’ll receive payments in retirement. Social Security benefits can start to be reimbursed between ages 62 and 70, and you get more money if you wait longer to start receiving payments. Payments are also calculated based on your income during working years, and the average payment comes out to $1,825 per month or $21,900 per year.

There are a few reasons why you shouldn't rely on social security for retirement.

• First, $1,825 per month is hardly enough money to live comfortably, especially since healthcare costs tend to grow in retirement, per Xillion research. Many Americans do in fact try to retire on social security alone, and that has contributed to a sad crisis for elderly poverty and homelessness in the U.S. The typical nursing home room in the U.S. costs $93,000 per year, and that doesn’t include so many other common expenses for older Americans.
• Second — and of even greater importance — social security is heading toward crisis since funds are expected to dry out by 2035. As previously mentioned, it’s simply a matter of demand, supply, and demographics. Over 80% of working Americans believe that social security will provide reduced or no benefits by the time they retire, according to a Pew Poll from 2019.

There are many supposed rules of thumb for calculating optimal retirement savings. But really, there’s no single plan for everyone, according to Xillion's research. Instead, your retirement goals should reflect your own priorities: how much you want to travel, where you want to live, how often will you dine out, etc. You also need to budget for unexpected expenses such as emergency medical costs (the average 65+ year-old in America spends over $7,000 per year on medical expenses) or an earlier exit from the workforce than anticipated.

If you are young and in the prime of your career, these considerations can feel far off. Many young people struggle to plan so far out given all the crises we seem to face: global warming, a proxy war with Russia, political turmoil, and the prospect of AI labor displacement. Still, we’ve faced similar problems before. If an American in the 1960s decided not to invest their $10,000 in the S&P 500 due to the Cuban Missile Crisis (“why bother, we’re all going to die”) they’d miss out on $3.4 million in retirement money today.

What’s the best way to plan for retirement? Invest today, and do it the right way. Xillion’s Portfolio Optimizer can help you find the optimal investments for your path toward financial independence. Depending on your salary and current savings, you might even be able to “retire” much sooner than anticipated. One recent Xillion customer discovered how to make an additional estimated $4.5 million from their 401k investments over the next 30 years — all within a few minutes.