There are many reasons why older Americans ask “Is it possible to live on Social Security benefits?” Job loss, chronic health problems, protracted family crises, and other reasons may have prevented well-intentioned Americans from saving enough money to retire in comfort.
Some financial experts believe that it’s possible to live on Social Security retirement benefits without additional income sources. Although it is best to invest a portion of income each year in a tax-advantaged employer 401(k), Individual Retirement Account (IRA), or Roth IRA in preparation for retirement, not everyone in the United States has the ability to make these choices or commit to them.
If you haven’t saved additional money to retire but you’ve paid into the Social Security system over a working life, the good news is—it’s possible to live safely on the modest retirement benefits Social Security provides to workers. To estimate your Social Security retirement benefits, create a My Social Security account. Let’s consider how to live on Social Security retirement benefits alone.
Social Security Beneficiaries
According to SSA.gov, about 165 U.S. workers pay into Social Security or receive Social Security benefits:
Slightly more than half of U.S. workers aren’t covered by a private pension.
About 35 percent of workers haven’t put enough money into retirement plans.
The average Social Security beneficiary receives USD 1,348 per month in retirement benefits.
About 22 percent of married retirees and about half of single or divorced retirees say Social Security retirement benefits supply almost all (about 90 percent or more) of their income.
How to Live on Modest Social Security Retirement
If you reach Social Security Full Retirement Age (66 or 67 years, depending on your birth year), single, don’t own a home, it’s time to create a plan to use the assets you have. Of course, it’s a great suggestion to save more money if you’re still working. This may be a great time to consider a part-time job or realize the dream of starting your own business.
If you’ve already retired, saving money may be difficult or impossible if you earn an average monthly Social Security retirement benefit. The following assumes you receive (or expect to receive) at least USD 1,300 in monthly retirement benefits from Social Security:
Get a roommate: If you’re married, it’s likely that you plus one can earn at least USD 2,600 in Social Security retirement benefits. If you’re not married, consider getting a roommate or two, or move in with another single friend or family member. You can stretch the money you’ve got by pooling expenses like groceries, rent, utilities, or transportation costs. Living with another person can also provide important social support and friendship.
Move to a tax-friendly state: If you live in a state that taxes Social Security retirement benefits, one of the ways to automatically save some money is to move to a state that doesn’t. For instance, if you live in Rhode Island, you’ll pay state tax on Social Security. If you need to live on Social Security benefits alone, consider moving to Arizona, Nevada, Florida, South Carolina, Delaware, Mississippi, Georgia, or Louisiana.
Factor in the Cost-of-Living: Taxation is important, as above, but it’s also important to lower the costs of everything when you’re living on a modest fixed income. Consider how much you spend on rent, car, and food, then compare online statistics about how your cost of living compares to other areas. While you’re comparing cost-of-living statistics, consider crime rates. No one wants to live in a cheaper but more dangerous area.
Consider the weather: If you pay a huge heating bill in the winter and a high air conditioning bill in summer, calculate how much you’ll save in a place where you don’t pay either. According to S. News & World Report, parts of California, Florida, Georgia, Hawaii, North Carolina, South Carolina, Oregon, Puerto Rico, Texas, or Washington could help you cut these costs.
Live frugal: Back in your high school or college days, you probably took advantage of free activities. You went to the beach, attended a free concert, enjoyed museums, or explored the joys of hiking. If you enjoy an active outdoor lifestyle, choose a home base that allows you to take advantage of activities that won’t cost you. When you choose to enjoy a meal out, consider eating early (early bird, happy hour) or use a coupon to save some money.
Where to Stretch Your Retirement Benefits
Dreams of retiring to Honolulu or to a private Caribbean island won’t be possible if you’re living on an average monthly Social Security retirement benefit. As long as you’re willing to pool resources with at least one other Social Security retirement beneficiary, it’s possible to live modestly and safely.
According to the Wall Street Journal, some of the places to consider now include: Florida (Port St. Lucie, Ocala, Palm Coast, or Ormond Beach); Arizona (Prescott, Lake Havasu City, Yuma, or Casa Grande); Delaware (Dover or Newark); Georgia (Athens, Woodstock, Savannah, or Stockbridge); South Carolina (North Augusta, Greer, Goose Creek, or Summerville); Nevada (Winchester, Paradise, or Summerlin South); Mississippi (Biloxi, Greenville, or Starkville); and Louisiana (Sulphur or Terrytown).