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Retiring on Rental Income vs Social Security – A Financial Comparison

I’ve sat down with many people over the years to discuss the financial differences between retiring on rental income vs social security benefits. And now, at a time when the national debt is more than 34 trillion, inflation is through the roof, and there’s talk of social security benefits running dry in the next ten years, more people are inquiring about finding an alternative to a monthly social security check. The reality is that the financial forecast for future retirees doesn’t look very bright, and this is pushing forward-thinking people to take control of the reigns and begin to lay the groundwork for a financially stable retirement.

Weighing Rental Income Against Social Security Benefits

U.S. citizens are starting to wake up to the fact that relying on SS checks as a sole source of income is a risky strategy, not to mention the fact that the benefit amount is generally not enough to live comfortably on, not by any means. Additionally, it’s obvious to me which option is more sustainable when it comes to social security vs rental income. I would go with rental income because in today’s economy, people can’t afford to put food on their table even when they’re working full-time.

With all that said, it’s no wonder I have people contacting me for advice on the best way to save for retirement. I advise them to think about supplementing social security with rental income in retirement; it’s that simple.

Ok, now let’s dive into a detailed comparison that reveals why retirees should rely on rental income instead of social security payments.

Reliability of Real Estate Investments vs Social Security Funds

When I think about the reliability factor of those retiring solely on social security, what comes to mind is a report I read that reveals how fast social security is going to run out of money. Or, in reality, when the government won’t be able to fulfill the IOUs that they’ve written against future taxes that are paid into the fund. I personally feel it’s a huge risk to place your trust and financial future in the hands of the Social Security Administration. I don’t know about you, but I feel more comfortable sitting in the driver’s seat of my own wealth.

In a message to the public within the Summary of the 2023 Annual Report that I read, it states:

The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of scheduled benefits.

In a more recent financial report released by the United States government in February 2024, Social Security and Medicare were estimated to be under funded by $175,300,000,000,000. Are you starting to see the big picture now of why it’s crucial to diversify your income with assets such as gold or rental properties vs relying solely on social security?

If all this wasn’t enough, some members of Congress would like to reel in Social Security benefits to help reduce national debt spending. What ideas do they have in mind to make this happen? They would like to raise the retirement age, as well as reduce benefits for high-income earners.

Financial Growth Potential – Fixed Social Security Payments Compared to Monthly Rent Checks

It’s important to be informed when it comes to the amount of money you’ll receive from whatever retirement vehicle you’ll draw from. With that in mind, let’s go over a few numbers for social security compared to rental income.

Social Security Income Potential

Social Security benefits provide a fixed monthly amount, based on your lifetime earnings and the age you retire. In my opinion, even if you make the maximum amount, yes, there is a maximum benefit amount; it’s not enough to get by comfortably, let alone enough to live the lifestyle you may be hoping for once you retire.

Income from rental real estate compared to social security benefits

The average social security benefit was estimated to be $1,907 in 2024. Nowadays, this isn’t even enough to pay rent in a decent apartment. Here are some numbers that can give you the bigger picture, taken from the Social Security Administration website:

The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2024, your maximum benefit would be $3,822. However, if you retire at age 62 in 2024, your maximum benefit would be $2,710. If you retire at age 70 in 2024, your maximum benefit would be $4,873. 

For many people, this would be all they would have to live on because not everyone has additional retirement funds to supplement their SS benefits. Additionally, most individuals don’t make over $150,000 to qualify for the maximum amount of $4,837. You can get an estimate of how much you will receive in social security payments by using this calculator provided by the SSA.

Rental Real Estate Income Potential

Now that you’ve had a full rundown of the insufficient funds you would receive if social security benefits were your sole source of funding, let’s take a look at what your income potential could be if you added rental real estate to your retirement game.

I believe real estate investing is the best way to build wealth, and I know this from experience. You see, rental real estate doesn’t offer a fixed income; it’s actually the opposite. This asset type provides the opportunity to create multiple streams of income, where the limit is only created when you decide you want to stop increasing your wealth. Additionally, investing in rental properties not only provides the funds needed to retire comfortably but can allow an individual to actually retire early. If this has you interested, head over to my article – How to Retire Early Using Real Estate Investing.

How does rental income differ from social security checks when it comes to monthly payments? Well, the bottom line is that with social security, you’ll get one monthly check for, let’s say, $1000 to $4,837, depending on qualification. In contrast, real estate investors will get anywhere from $1,200 to $20,000+, depending on how many properties they own. The sky is the limit as to how much income an investor wants to pull in each month. On top of this, each property is growing in equity, increasing the investor’s net worth.

With social security, most people will be “just making it.” With rental real estate, there’s the potential to generate great wealth with assets that are not affected by the wavering economy or the volatile stock market. Related to this, arm yourself with more information by diving into my article – Beyond the Stock Market Rollercoaster: Building Wealth with Rental Income.

Retiring on rental income vs Social Security – Which Strategy is Best for You?

While social security may play a role in retirement planning, its unpredictability and limited growth potential make it a risky foundation for financial security. On the other hand, rental real estate offers predictable income and the opportunity for significant wealth accumulation, well beyond what social security could ever offer. For those looking towards retirement, I hope I’ve made a compelling case for considering rental income as a primary funding strategy because it can literally change your life, put you in the driver’s seat of your financial security, create legacy wealth, and allow you to live the life you’ve been looking forward to after you retire.

How to Retire on Funds From Rental Real Estate

For those interested in securing their future by adding real wealth on top of their social security benefits, I suggest giving the team at Morris Invest a call so they can walk you through how to make it a reality. They’ll provide information on such things as investing with a self directed IRA that lets you hold rental properties in the account, and how to roll over your 401(k) to an SDIRA so you can use those funds to invest in real estate. You can get ahead of the game by checking out our post on this topic – Borrow From Your 401(k) to Invest in Real Estate – A Secret Wealth Building Strategy.

You’ll also be provided with details on our new construction properties, the fact that we will take care of every detail for you; even placing a tenant in your rental, as well as assigning a property manager. We make it easy to start investing for your future, it’s what we do best – we’re here to help you get on the path to financial independence. So, don’t hesitate to schedule a complimentary 30-minute call with one of our team members.

Before you go, if you’d like to build retirement wealth without relying on the government, then dive into this exceptional video I put together where I interview Mat Sorensen about building wealth outside of Wall Street. It includes details on how to get started with a self-directed IRA, information on the new construction properties we offer, and other details that can kickstart your real estate journey.

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