So, your retirement plan is to live on your Social Security? It might work. Much depends on the size of your checks and your lifestyle.
Bear in mind, though, that the maximum you can expect to earn from Social Security in 2020 is about $3,000 a month if you claim benefits at full retirement age (66 and up, depending on your birth year).
Most people don’t get that much, though. The average benefit among retired workers is about $1,500. If you are counting on those benefits 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.
Medicare beneficiaries spend around $5,801 per year on average for out-of-pocket health care costs. For those 65 and older, costs are even steeper: $6,089.
All right, you’re convinced. But how to cut those costs? Start by comparison shopping at these sites 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.
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
Wait at least until full retirement age (FRA) to claim Social Security. Taking your benefits earlier reduces how much money you’ll get each month.
If your life expectancy is short or you aren’t depending on the money, it may make sense to claim sooner. But for most of us, delaying Social Security pumps up your checks by 8% per year until you do claim the benefit. 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.
We’ve done much of this searching for you. Here are:
- 10 places in the U.S. where your Social Security goes furthest
- 25 best places in the U.S. to live in retirement
- 10 safe and cheap countries for retirees
- 10 states where property taxes are lowest
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, 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.
Here’s what U.S. households spent on their cars in 2019:
- Car insurance: $1,545
- Gas and motor oil: $2,094
- Vehicle purchase: $4,394
7. Don’t spend a dime for entertainment
You might be astounded at all the entertainment that’s free for the taking. You can cut your cable bill and stream 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
- Free access to electronic books
- 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 Silver Sneakers 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 membership, look into changing your Medicare plan for one that includes it. In 2021, for example, 96% of Medicare Advantage plans will include a fitness benefit. Be careful, though, to understand the rules when switching to a Medicare Advantage plan from Original Medicare.
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