So, your retirement plan is to live on your Social Security benefits? It might work. Much depends on the size of your benefit checks and your lifestyle.
Bear in mind, though, that few people get rich off this program. The average monthly benefit among retired workers is around $2,000.
If you’re counting on those benefit checks to cover all your expenses in retirement, it’s never too early to start planning how you’ll make it work. These ideas and tips can help.
1. Eliminate debt before you retire
What’s your biggest debt? For many (if not most) of us, it’s a mortgage. In some cases, it can be smarter not to pay off a mortgage early. Retirement is not typically one of those cases, though.
In fact, we identified seven situations when it’s smart to pay off the mortgage. Retiring — you guessed it — is one.
When your income is fixed and you don’t have much coming in each month, paring back housing costs buys precious financial slack. That goes double if Social Security will be most of your income.
2. Cut out-of-pocket medical costs
Wait, doesn’t Medicare cover your medical costs? Well, yes and no. It covers most costs. But you still can end up with hefty bills for copays, deductibles, insurance premiums, prescription medicines and services not covered by Medicare.
In fact, Medicare households spent an average of $7,000 per year on health care costs, according to a KFF analysis of 2022 data.
All right, you’re convinced. But how to cut those costs? Start by comparison shopping for discounts and coupons on prescription drugs.
- Comparison shop before having a procedure done to be sure your insurance covers all the practitioners and services involved.
- Negotiate high charges and fees with hospitals and clinic billing offices and ask for a cash discount.
- Take full advantage of a flexible spending account (FSA) or health savings account (HSA).
- Learn more about cutting Medicare costs.
3. Emancipate your adult kids
If you don’t have the resources to live well on your own, it’s time to cut free any adult children who still are attached to your purse strings. You will need that money, and your kids still have time to earn and save their own.
Give them plenty of advance notice and set a firm deadline. Explain your financial situation without apologizing or over-explaining. Tell them what confidence you have in them and in their ability to care for themselves. Trust them to figure out the rest.
4. Hold off claiming Social Security
For many people, it makes sense to wait at least until their full retirement age (FRA) to claim Social Security. Taking your benefits earlier than that age set by the Social Security Administration reduces how much money you’ll get each month.
Review the pros of delaying and some reasons for claiming right away to decide what’s best for you.
If you expect to have a short life expectancy or you aren’t depending on the money, it may make sense to claim sooner. But for most of us, delaying Social Security past FRA pumps up benefit checks by 8% per year until you do start claiming. At age 70, you no longer get such increases, and there’s no more reason to delay.
5. Look into living where housing is cheaper
Moving where you think life is cheaper isn’t always the solution. If moving appeals to you, though, it’s worth considering as a way to stretch limited retirement income. Whether you relocate within the U.S. or move abroad, do the research to find a lower cost of living and a chance for adventure in a new place.
For more, check out the states that help ease the property tax burden for folks who are 65 or older.
6. Sell one car
Retirement is likely to let you slow down. That’s why they call it retirement, right? You may need to zoom around less, and, if there are two of you, you may no longer need two cars.
Practice before you commit by sharing just one car. Experiment by walking more, riding your bike, hitching a ride with friends or taking public transportation if possible.
Run the numbers to see if it’s worthwhile. You’ll make money by selling the vehicle, plus you’ll save on registration, auto insurance, gas, roadside insurance, oil and maintenance.
7. Don’t spend a dime on entertainment
You might be astounded at all the entertainment that’s free for the taking. You can cut your cable bill and stream video entertainment for free. Stop paying for music and audiobooks. Read all the books, magazines and newspapers you want at the library or through library databases online.
Here are a few utterly free sources of entertainment:
- Free audiobook downloads
- Stream movies and TV at no charge
- Take classes online at Ivy League universities free of charge; find colleges and universities where seniors attend tuition-free
8. Get fit for free
Drop that expensive gym membership and don’t look back. We’ve found so many alternatives.
Many Medicare plans include access to the popular SilverSneakers fitness program. Membership is free for eligible seniors 65 and up (check eligibility here). The program covers free gym memberships and includes on-demand and scheduled streaming classes in cardio fitness, balance, flexibility, strength, yoga and weights.
If your plan doesn’t include a gym membership, look into changing your coverage to a Medicare Advantage plan that includes a fitness benefit.
Be careful, though, to understand the rules when switching to a Medicare Advantage plan from Original Medicare.
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