As of 2022, Americans aged 65 to 74 had a median retirement savings balance of $200,000, according to the Federal Reserve. But many older Americans approach retirement with no savings at all and instead rely on Social Security to cover their senior living expenses.

Doing that, though, could result in a pretty miserable retirement. That’s because Social Security might end up paying you a lot less money than you’d think.

What the average monthly Social Security benefit looks like today

The average retired worker today collects $1,920.48 per month in Social Security. That’s a little more than $23,000 per year.

If that number is shocking to you, well, you’re probably not alone. It’s a big misconception that Social Security replaces the majority of workers’ preretirement incomes. If you earn an average wage, you can expect your monthly benefits to replace more like 40% of what you used to earn.

Now, most seniors can manage a 20% to 30% pay cut in retirement, especially since certain expenses do tend to decrease in the absence of having to commute to a job. But there’s a big difference between a 20% to 30% pay cut and a 60% pay cut.

If you retire on Social Security alone, the latter is what you might be looking at. And that could mean living a very bare-bones lifestyle when you’d rather be enjoying retirement to the fullest.

How to set yourself up for a more financially sound retirement

If you don’t want to spend the bulk of your retirement worrying about money, you’ll need income on top of Social Security. And you have different options there.

One is to save well for retirement during your working years — or play catch-up if you’re getting close to ending your career and aren’t super thrilled with your 401(k) or IRA balance. The good news is that workers over age 50 can make catch-up contributions in these accounts to help make up for lost time.

It’s also a good idea to set yourself up with investments that continue to pay you in retirement. Municipal bonds fit the bill, since they’re generally less risky than stocks by nature, and the interest they pay is always exempt from federal taxes. But it could also be a good idea to hang on to some dividend stocks in retirement for the added income.

You can also look at working part-time as a retiree for an income boost. And collecting Social Security won’t prevent you from being able to earn money from a job.

In fact, once you reach your full retirement age for Social Security purposes, you can earn any amount of money without risking having some of your benefits withheld. However, if you file for Social Security before full retirement age, you’ll be subject to an earnings-test limit.

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And if you don’t like the idea of having to take a traditional part-time job in retirement, join the gig economy instead. That could make it so you’re doing something you like on a schedule that works well for you.

Just because the average monthly Social Security benefit today is $1,920.48 doesn’t mean that’s what you’ll collect in retirement. Your monthly benefit will depend on your lifetime wages and the age at which you sign up. But no matter what your personal Social Security check looks like, it’s a good idea to plan to supplement it with outside income to avoid financial worries.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

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Here’s the Average Monthly Social Security Check Today — and What Your Retirement Might Look Like if It’s Your Only Income was originally published by The Motley Fool