I’m a Retiree: Expenses My Social Security Covers and What It Doesn’t

Social Security keeps millions of seniors out of poverty, but it has never provided anyone with a glamorous retirement — at least not without a little help from a healthy nest egg .

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Every retirement check is different, and each retiree must decide when to claim their benefits and which of their expenses they need those benefits to cover.

Here’s the story of a baby boomer who enlisted an ambitious young relative to help her find the perfect savings-to-benefits ratio to support her ideal retirement.

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A Retired Aunt Consults a Niece With Unique Talents

Mary Zhang is the head of marketing and finance at the New York-based digital infrastructure firm Dgtl Infra , where she leads the company’s data center coverage. Zhang analyzes industry players like Equinix and Digital Realty with a focus on the hyperscale, colocation, cloud and edge computing sectors. A graduate of Duke University with an MBA, she previously worked as a lead strategist and consultant in the data center industry.

With high-level skills in finance and technical analysis, not to mention a graduate degree in business, it’s not surprising that Zhang caught the eye of an older relative looking for help with her retirement strategy — and the younger woman was able and willing to help her aunt make the best use of her Social Security benefits.

“I’ve had the privilege of helping manage my aunt’s retirement plan,” said Zhang. “Her experience offers valuable insights into how Social Security covers expenses — and where it falls short.”

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Retiring Early With Lower Benefits vs. Waiting for a Bigger Check

The younger woman was happy to learn that the older one had spent her life saving the right way — slowly and consistently over years and decades.

“My Aunt Sarah retired at 65 with a nest egg of about $800,000, which she built through consistent 401(k) contributions and smart investments in index funds,” said Zhang. “Her Social Security benefit is $1,800 per month.”

That’s slightly less than the average monthly payment of $1,869.77, which makes sense because — intentionally or not — Aunt Sarah traded years for dollars.

You become eligible for Social Security at 62, but the SSA deducts 5/9 of 1% for every month claimed before the full retirement age of 67 for up to 36 months. After that, the SSA deducts 5/12 of 1% per month for up to 30% of your check.

Aunt Sarah could have settled for $0.70 on the dollar by claiming benefits at 62 or amassed delayed retirement credits until she was 70 — but for her, 65 was the Goldilocks number.

Benefits for Needs, Nest Egg for Wants

Zhang says that her aunt uses Social Security to cover her basic necessities.

“It pays for her $1,000 monthly mortgage on her paid-down home, about $400 for groceries, and $300 for utilities,” she said. “However, it doesn’t stretch to cover all her needs and wants.”

The ever-rising cost of health care is the primary reason why.

“Her Medicare premiums, about $170 per month, eat into her Social Security check,” said Zhang. “And while Medicare covers many health expenses, she still pays about $200 monthly for supplemental insurance and out-of-pocket costs.”

If Social Security were her only source of income, Aunt Sarah’s life would be more of an existence — but she draws from her nest egg for the luxuries that make life worth living.

“Social Security doesn’t come close to covering her travel aspirations,” said Zhang. “Last year, she spent $8,000 on trips to visit grandkids and a European vacation, all funded from her retirement savings. She’s also found that home maintenance costs, like a recent $5,000 roof repair, require dipping into her nest egg.”

So, Social Security Plus How Much per Month?

Zhang’s aunt supplements her Social Security checks by withdrawing roughly double her monthly benefit from her nest egg.

“To maintain her lifestyle, Sarah draws about $2,500 monthly from her retirement accounts, on top of her Social Security,” said Zhang.

The Social Security Administration (SSA) says retirees should expect their benefits to replace roughly 40% of their pre-retirement earnings and that Social Security was never meant to be the sole source of retirement income.

So how did Aunt Sarah decide on $2,500 per month?

Zhang didn’t reveal if she used the tried-and-true 4% rule — which says retirees can safely withdraw 4% of their savings for 30 inflation-adjusted years — but the numbers match up neatly.

Four percent of $800,000 is $32,000, which comes out to about $2,667 per month. That puts Aunt Sarah comfortably under the mark by about $167 per month. Everyone’s number is different, but for Aunt Sarah, $2,500 was just right.

“This allows her to enjoy some luxuries and handle unexpected expenses without stress,” said Zhang.

The Teacher Learns Valuable Lessons

Zhang didn’t charge her aunt for her input, but the younger woman was paid in the form of wisdom and experience that she’s still young enough to apply to her own future.

“Sarah’s experience has taught me the importance of robust retirement savings beyond Social Security,” she said. “It’s a lesson I’m applying to my own retirement planning, aiming to save enough to supplement Social Security significantly.”

This article originally appeared on GOBankingRates.com : I’m a Retiree: Expenses My Social Security Covers and What It Doesn’t