For a good portion of American retirees, social security benefits are an important source of income. About half of married beneficiaries, according to the Social Security Agency, receive at least 50% of their income from social security, and about one in five depend on their benefits for more than 90% of their retirement income.
Despite the fact that so many people rely on their services to make ends meet, do not economize on their own and expect social security to cover all their retirement costs, that's not the best idea. The average beneficiary only receives about $ 1,400 a month, and most people have to pinch pennies to make ends meet.
Sometimes people have no choice but to make the most of social security in their retirement because they do not mind. There is not much savings that you can fall back on. While it is never too late to start saving, if your savings are used up a few years after retirement, it may be your best option to live with social security alone. Fortunately, there are a few things you can do to make sure that you live your best life on a tight budget.
. Delayed use of benefits to obtain larger checks
How much you receive in terms of social security benefits depends on when you apply for them. The only way to get the full amount you are theoretically entitled to is to claim at your full retirement age (FRA), 66, 67, or somewhere in between, depending on when you were born. You can claim earlier than your FRA (at the age of 62), but this will cut your benefits by up to 30%. On the other hand, if you wait until your FRA has asserted your claim (until you are 70 years old), in addition to the full amount you are entitled to, you will receive up to 32% more.
Once you claim your benefit, you can change your mind about it technically. However, you have only one year left and you have to repay the services already received. Once your decision is made, you will receive your benefit for the rest of your life (although annual cost of living adjustments will affect exactly how much you receive). This means that if you make a claim early and receive smaller checks, you will receive these smaller checks for life. However, delaying your efforts to earn those thicker checks will give you more money every month for the rest of your life.
These larger checks can be very successful if social security is your only source of income in retirement. Even a few extra hundred dollars a month can make the difference between feeling good and comfortable.
. 2 Pay as much debt as you can before you retire.
The less debt you have to repay monthly, the more money you have to spend on fun retirement activities. This is especially important if you live solely on social security because every dollar counts.
If you can not pay off all your debts before retirement, first focus on the debt with the highest interest rates. The longer it takes to repay high yield debt, the more your interest payments will increase over time. Depending on how much debt you have, you can end up paying thousands of dollars in interest alone. Even if you pay more than the minimum payment per month, it can take years for most of the money to be spent on interest.
After your high yield debts have been repaid, you can start getting the debt at the next higher interest rate and so on until you are debt free.
If you're having trouble paying off debts while saving on retirement, set your priorities based on the type of debt you have and what you pay in interest. While it is always a good idea to spend at least some money on retirement, if you have thousands of dollars in debt with you, for example, paying 18% interest a year and paying money into a retirement account that earns an annual return of 7% Maybe not as much good as repaying your debts.
. 3 Rethink Your Pension Expectations
You can dream of spending your retirement traveling around the country or lazing on the beach every day. But if you want to live off social security benefits, you may need to reduce your expectations.
That does not mean you can not live a really enjoyable retirement on a budget. No matter where your interests lie, there are many free and inexpensive activities that you can enjoy in retirement. You may not be able to travel the world and try out expensive hobbies, but that does not mean you have to spend your retirement at home watching TV. Find a reason that matters to you and volunteer at a local nonprofit organization. Write the novel you've always said you've never had time for, or get some friends and explore the parks and museums of your city. There are many ways to enjoy retirement without spending a lot of money knowing where to look.
If you're on a tight budget, retire your creative muscles and find ways to cut costs without compromising your quality of life. For example, if you want to vacation occasionally, you should travel in off season when airline tickets and hotel rooms are cheaper. Or, if you've always wanted to learn a new hobby, search for free tutorials online and practice your skills at home before signing up for expensive classes.
If you only live on social security benefits, this is not ideal if it is your only option that you can still use. If you are creative with your retirement lifestyle and make strategic financial decisions, you can enjoy a comfortable retirement even on a tight budget.