Every month my wife and I get checks from Social Security. The checks arrive by direct deposit in our joint checking account. She’s been getting hers since 2005. I’ve been getting mine since 2009. That’s a long time.

If you’re retired and have filed for benefits, you’re having a similar experience. If you’re not retired, you will eventually follow in our happy footsteps.

At least that’s what I hope.

Why do I hope that?

Simple. Social Security is a vital part of retirement security.

Yes, I know that you know that. We all know that Social Security provides more than 50% of income for 40% of retirees and 90% of income for about 15% of retirees.

What few people, including those in Washington, seem to realize is that Social Security benefits are a large part of retirement income for people far up the income and personal success scale. You can, for instance, have been in the top 5% to 10% of income for your entire working career and Social Security might still be your largest single source of income.

You can understand this by considering the distribution of Social Security benefits. The most recent figures are for mid-2023, so they include the 8.7% increase retirees had at the beginning of the year.

• About 15% of retirees received a benefit less than $1,000. Fortunately, that made them eligible for Supplementary Security Income, which brought their income up to a minimum of $1,000.
• A benefit of $1,100 per month marked the bottom 20%.
• A benefit of $1,200 per month marked the bottom 25%.
• A benefit of $1,800 per month marked the 50th percentile or median.
• A benefit of $2,300 per month marked the top 25%.
• A benefit of $2,500 per month marked the top 20%.
• A benefit of $2,900 per month marked the top 10%.
• A benefit of $3,200 per month marked the top 5%.
• A benefit of $4,100 per month marked the top 1%.

Some would call these figures chicken feed. But you would need a significant portfolio to provide the same income.

How large would that portfolio have to be?

Invested in a typical 60/40 (equities/fixed income) portfolio, you’d need at least 240 to 300 times your monthly benefit to be about 90% certain that your purchasing power would keep up with inflation and that you wouldn’t run out of money for 30 years. That’s the number of years you might live if you retired at 65. Odds are you won’t, but being broke at 80, 85 or 90 would be a lot more painful than being broke at 25.

Apply that range to the median monthly benefit of $1,800 per month, and you’d need to have somewhere between $432,000 and $540,000 in financial assets to produce the same amount of inflation-adjusted income as provided by Social Security.

Lots of retirees have nowhere near that in savings.

According to the website www.dqydj.com, only 30% to 35% of people have that much at age 65-69. The website has used the latest figures from the Federal Reserve Survey of Consumer Finance. (You can also see net worth figures by age in my recent Wealth Scoreboard column here. The figures I use include home equity, which raises net worth substantially for all but the very rich.)

Go to the top 10% level of benefits and you’d need $696,000 to $870,000 in financial assets to provide the same amount of inflation-protected income. The air is still thinner here with only about 25% of households having that level of financial assets.

And what about the Big Dogs, the ones in the top 1% of monthly benefits collecting at least $4,100 per month?

Well, they’d need to have $964,000 to about $1,230,000 in financial assets to produce the same income as they get from Social Security. That’s still higher on the hog, in the top 20% of financial asset wealth.

It’s important to note here that these figures indicate how much you need in financial assets to provide a reliable income equal to a given Social Security income. You’d need a lot more assets to make Social Security benefits less than half of your retirement income.

Bottom line: When it comes to fixing Social Security, the stakes are huge for just about everyone.