Can the Upper Middle Class Retire Without Social Security? Yes, If …
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Jordan Rosenfeld
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Gary Dudak
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Being upper middle class might sound almost like being rich, but the income level typically starts at around $89,000 and caps out at $150,000, which is not as much as it seems on paper — especially if you live somewhere with a high cost of living.
Meanwhile, concerns about whether Social Security will go bankrupt or be done away with by politicians begs the question: Is an upper middle class salary enough to retire on without Social Security? Here, experts explain whether or not it is possible and under what circumstances.
If You Started Saving Early
According to Bob Chitrathorn, CPF, CFO and vice president of wealth planning at Simplified Wealth Management, those who can retire without relying on Social Security are those who started saving earlier in life and took advantage of compounding interest, making it “exponentially easier to retire.”
“On the yes side are individuals who started saving say in their early to late twenties to early thirties. These are people who made a mental mind shift, so they just get used to saving. They get addicted to saving. Saving becomes a fun hobby for them,” he said.
Chitrathorn said for these folks whose mentality is to not buy and overspend, “They’d be able to make it work without Social Security, without feeling like they’re neglecting themselves or low on their standard of living.”
If the Numbers Add Up
Those savings can’t be theoretical, however, according to Kevin Thompson CFP, RICP, founder and CEO of 9i Capital Group LLC. He said that an upper middle class couple will likely have 60% to 70% of their retirement income covered by Social Security, based on a $100,000 expense lifestyle.
“To get that sane $70,000 per year gross, you would likely need 1.7 million on a withdrawal rate of 4% to mimic the sane income. So the answer would be a resounding yes they ‘could’ if they had amassed a larger pool of assets,” he explained.
If You Can Adapt Your Lifestyle
There are some members of the upper middle class who won’t be able to retire without Social Security because they’re just not able to adapt their lifestyle to living differently or on less, Chitrathorn said.
He added, “You should be able to maintain your same lifestyle when you retire. And those who don’t, those in the medium $150,000 range, usually what ends up happening is they force themselves to retire because they don’t want to work anymore. And then they’ll just make do with what they have from Social Security.”
However, if those Social Security benefits are eliminated, it will be very hard or impossible for these retirees to get by.
If You Have a Modest Life
For upper-middle-classers who already live a modest life, who haven’t tried to keep up with the Jones’ and have a moderate approach to spending, you will most likely be able to retire without needing Social Security, Chitrathorn said.
He added that trying to “ramp up and save for retirement” at a late stage will be unlikely to bring in what you need in time.
If You Have Good Financial Literacy
The difference between those who have enough to retire without Social Security and those who don’t may come down to financial literacy.
Chitrathorn said, “I’ve been a financial advisor for almost 20 years in September and what I’ve seen is the people who start saving earlier are the ones who are able to retire and not worry. And saving was easy because they learned about it earlier on in life so that they just naturally started saving.”
This is especially helpful when people begin to make more money, and instead of living a more expensive life, they just put away the difference toward retirement, he explained.
If You Live in a More Affordable State
The high end of the upper middle class, about a $150,000 income, stretches a lot differently if you live in a state like Texas vs. a state like California, Chitrathorn said. So, if Social Security goes away, you have to take into account where you live and may even consider a geographical relocation if your retirement accounts aren’t adding up to enough.
If You Have Invested Wisely and Consistently
True Tamplin, CFP, founder of Finance Strategists, explained, “The key to retiring without leaning on Social Security is to save and invest wisely. Think about it: the earlier you start stashing away money and the more you invest in a diversified portfolio, the bigger your retirement fund will be.”
He said the math is straightforward: “Financial advisors often suggest saving at least 15% of your income annually for retirement. If you’re making $150,000, that’s about $22,500 a year. Over 30 years, not even counting investment growth, that’s $675,000 saved up. But let’s be real, when you invest that money, especially in stocks or mutual funds, it grows over time thanks to compound interest.”
For example, if your investments grow at an average rate of 7% annually, which Tamplin said is totally possible with a well-diversified portfolio, you’re looking at a way bigger number by the time you hit retirement. “Just plugging in the numbers, you can see how feasible it is to retire comfortably without needing to rely on Social Security.”
If You’re Careful With Your Finances
Of course, living costs, healthcare, and unexpected expenses can throw a wrench in your plans, so having a buffer is crucial, Tamplin pointed out. “Plus, don’t forget about inflation eating away at your purchasing power.”
So, while it’s definitely possible for the upper middle class to retire without Social Security, it requires careful planning, disciplined saving, and smart investing. “No specific source needed here, just basic financial planning principles and a bit of math,” Tamplin concluded.
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