How To Live On Social Security and How to Avoid Doing So

Aging is a fact of life and there is really nothing you can do about it other than plan and prepare for it. Social Security can serve as an umbrella or a means of sustaining yourself when you eventually get to retirement age. It is actually possible to use your Social Security benefit to pay for the retirement lifestyle you want. All it will take is adequate and wise planning and preparation. But can you live on Social Security and Social Security alone? This is the crucial question and the answer is yes.

How to Live on Social Security

While living on Social Security is certainly possible, doing so will require some planning and work on your part, which includes making the maximum possible monthly payments and keeping your costs low. The following steps are helpful:

1. Pay Off Debts Before Retirement

One of the wisest financial decisions you can make is to pay off all your debts before your retirement. It is best to clear out all credit card bills that you may have accumulated over the years. This frees up urgently needed money you can either put into savings or meet daily needs so you do not lose money spending it on past purchases.

2. Clear Your Mortgage Before Retirement

Accommodation makes up or takes up a major part of your expenses particularly when it comes to retirement. Therefore, it is best to sort that out or eliminate it by paying it off completely before you retire.

You can then use that freed income for other things. Homeowners end up paying a higher amount per month for housing when they have to service a mortgage than others who have paid off their homes and have lower housing costs. In some cases, housing with a mortgage takes up almost half of an individual’s or couple’s Social Security income.

Clearing your mortgage can also give you the chance to rely on a reverse mortgage later in life.

3. Plan for Relocating to a Tax Friendly State

Some states and Washington D.C. exempt Social Security benefits from taxation which is an advantage. In addition, other states within the union like Alaska and New Hampshire do not collect sales or income taxes.

Furthermore, big states like Tennessee, South Dakota, Texas, Wyoming, Nevada, and Florida collect sales taxes but exempt pension income from state taxes. This means that moving to a lower cost area or state will make it easier to use your Social Security check to pay more of your bills.

One option is to sell your house if you live in an upscale or posh environment, go for a lower priced home, and use the savings wisely to live a very comfortable retirement life. Either buying a cheaper home or relocating to a cheaper neighborhood or state will drastically reduce your ongoing housing costs.

4. Factor in Social Security taxes

Authorities usually will not require that you pay taxes on your Social Security if it is the only source of your retirement income. However, your Social Security benefits can be taxed if you have another declared source of retirement income.

This means that if the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefit exceeds $25,000 for individuals and $32,000 for couples then as much as half of your benefit could be subject to taxation.

In addition, if the other sources of retirement income exceed $34,000 for individuals and $44,000 for couples then the government can take as much as 85% of your benefit as taxes.

5. Try to get Maximum Social Security Survivor Payments

The death of a spouse means that the home will fall short of one Social Security check. The surviving spouse then receives an amount equal to the larger of the two Social Security checks.

A spouse who earns higher and also has a terminal illness or life threatening health condition will likely want to plan ahead the survivor’s payment he or she will leave behind for the surviving spouse.

In such cases, the spouse with the higher benefit can decide to delay claims on Social Security benefits until (say) the age of 70 which will attract a bigger payment for the widow or widower left behind when the higher earning spouse dies.

Delaying claims is very advantageous because it not only attracts higher payments but also allows for the dollar value of your annual inflation adjustments to be correspondingly higher.

This means you are getting a source of inflation-protected income that will be accessible for the rest of your life.

How To Avoid Relying Just on Social Security

There are times when it is actually better to plan apart from the Social Security safety net. This is because no one can actually accurately predict the future; you can only plan for demands that may arise. This is why you need to learn how to plan to retire comfortably even if Social Security were to disappear.

The gospel truth is that the nation’s Social Security program is running out of cash. A 2019 report by the Social Security Board of Trustees to Congress stated that the combined reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds will be depleted by the year 2035.

However, there is a ray of hope on the horizon in the sense that even if trust funds do run out by 2035 as stated, Social Security is expected to receive enough money from payroll tax deductions to settle at least 80% of its claims. Nevertheless, it is wise to pre-plan and prepare for a future without Social Security (if in the worst case scenario it actually happens).

The following saving and investment strategies will help you prepare adequately to live comfortably in your latter years as a senior citizen:

Start an Exercise Program

Studies, experience, and observation shows that people tend to develop diseases and illnesses as they age. The problem is quality Medicare is really not cheap, as the costs of treatment, prescription drugs, and surgeries have risen sharply. Contrary to people’s beliefs, Medicare does not pay for long-term care either, although it is increasingly supporting home health care.

Therefore, it is in your own best interests to maintain good health as much as possible. One of the key ways to do this in addition to good nutrition and proper sleep is to start an exercise program.

Good regular exercise sustained over time always yields dividends in good health. The healthier you are the fewer costs you will incur in maintaining your health which is a plus if you must live without Social Security benefits.

Review Your Expenses

Now is the time to look for ways to review your expenses on items or services you do not absolutely need. You must develop a thrifty mentality and apply it ruthlessly.

Get rid of stuff you don’t actually need that has been lying dormant in your attic, cellar, or basement for years. Such items can fetch a small but tidy sum on the flea market and the money you realize from such sales should be immediately plowed into your savings. You can also sell items as part of a yard sale or by using an app.

A good rule of thumb is to purchase only what is absolutely necessary and avoid not just waste but also spending valuable funds. This money can then be used to prepare a nice nest egg for retirement. Therefore, cut back and cut down on your expenses.

Begin to Increase Your Savings

A nice strategy is to find a way to accelerate your savings rate from 15% to 20% by setting aside larger sums or saving more from your income. It is also good economic and financial sense to save the maximum amount your (401) k allows.

So work at finding an extra job to do and put all that money in your savings account.

Side hustles are a fantastic way to make some extra on the side. They’re different than a regular job and don’t require the same commitment. It’s also important to think about your health. Working extra mightn’t be helpful if it puts your health at risk. Doing so would just mean more costs down the road, which decreases any benefit from that extra work.

Set a Financial Goal You Want to Achieve

It could be anything from $300,000 to $500,000 or even up to $1,000,000. Ideally, you must target putting away at least six times your salary. One major way to do this is by saving more, that is you could increase your savings deductions from 15% to 20%.

When you take into consideration the interest rates of whatever financial vehicle you are using to achieve your goal, you can do the simple math and arrive at the target figure you want over a number of years. It takes simple financial planning and discipline.

Review Your Investment Program or Begin One

Invest your money in mutual funds or other equity investments. You need to come up with and use the right investment strategy to achieve your goal of financial freedom, independence, and rest for your retirement years.

Carefully make a good selection out of the many investment vehicles that are available on the financial markets. Consult with the right people who are qualified in the financial industry, skilled, experienced, and knowledgeable.

You can raise a reasonable amount of money within a space of years via mutual funds that safeguard your funds and give you steady returns. When you aggregate this over time depending on the amount you set aside it can become a sizeable amount of money that will help keep the wolf away from the door.

Work in Retirement

Do not think of early retirement rather plan on working to reach your full retirement Social Security age which will be around 67 thereabouts. Lots of people continue to work to earn money to ensure a comfortable lifestyle and make ends meet even after they retire.

Statistics and projections show that there will be 13 million people over the age of 65 in the workforce by 2024 which is unprecedented and phenomenal. This is particularly true of professionals like engineers, architects, lawyers, doctors, and accountants who tend to earn high incomes.

These categories of people often get used to a certain way of life or routine which is difficult to stop when they attain the age of retirement. One way you can retain and maintain your lifestyle or standard of living is to work at a part-time job even after you have retired.

This will help you meet your essential daily expenses and leave you with time for other activities which can be leisure such as volunteer work, a vacation, or a world tour travel. When you are able to earn some income as a retiree it quashes fears of bankruptcy or financial insolvency during your retirement years.

Secure a Pension

It is not as easy to find a job that offers a pension plan now as it used to be in the past. If you do happen to get a job that offers a pension plan, it gives you an added or unique advantage in the sense that you can retire with a guaranteed monthly income that will reduce the amount you would need to save on your own.

People or individuals who are eligible for pensions are usually police personnel, military personnel, state and federal government workers, teachers, and firefighters. However certain private conglomerates like Coca-Cola do offer pension plans to their teeming workforce.

What can happen is that if you pay off your mortgages when or before you retire, and secure a retirement health care plan as well as Social Security benefits, your pension may allow you to retire without having made any savings.

Therefore, this means for all this to work out you must plan well ahead and the way to achieve this is to work at the same job for a relatively long period of time. This is because pension plans are based on the number of years you worked at an organization and how much money you earned during the last few years you were there.

The more years you worked there and the higher you earned the more eligible you will be for higher pension payments. Changing jobs serially every few years means you will not receive as large a pension as you would have gotten if you had stayed with the same employer for at least a quarter of a century or more years.

Final Thoughts

Retirement doesn’t need to be scary. It doesn’t mean that you’ll have no money either. Instead, with some forethought and planning, you can continue to live well in your retirement years.

We’ve highlighted a variety of ways to do so in this post, including decreasing your costs by paying off debts, clearing your mortgage, and possibly relocating to a tax-friendly state. You can also increase income through investments, side hustles, and other means.

Starting these approaches early can help you to develop a nest egg that will make your retirement years much easier.