11 Ideas for Living on Social Security Alone

11 Ideas for Living on Social Security Alone

Living on Social Security alone is not only possible, many retirees already accomplish that very feat every year. And, while the lifestyle associated with a Social Security income isn’t exactly luxurious, it doesn’t have to equal peanut butter sandwiches for the rest of your life, either. 

How you make living on Social Security alone work for you will depend on a lot of factors, not the least of which is what you want out of life.
retired couple at the beach holding hands and smilingLiving on Social Security alone is possible. Check out ways to make it work below!

Whoever Came Up with the Crazy Idea that We Need a Million Dollars to Retire?

The advice from many retirement financial experts is pretty clear. To have a reasonably comfortable life in retirement, you need about $1 million saved.

That’s the traditional guideline offered up by financial planner, Bill Bengen, back in 1994, and one that’s still embraced today.  (See more about his research below…)

But, let’s face it, most people simply don’t have anything close to a million dollars for retirement.

In Fact, Most Americans Will Live Almost Entirely on Social Security Alone

For most people, anything resembling $1 million is an unattainable goal.  In fact, according to the Government Accountability Office, the average retirement savings for Americans ages 55-64 is $104,000.  At this level of savings, you are living almost entirely on Social Security.

In a 2015 report by the Federal Reserve, “Report on the Economic Well-Being of U.S. Households in 2014,” many survey respondents said that they are not accomplishing any savings for retirement. The report explains, “31 percent have no retirement savings or pension.”

More of the people surveyed plan to depend on Social Security, and the number goes up with age. Where people under 30 typically show little confidence in Social Security, 92 percent of people over 60 plan for or already receive Social Security benefits.

The higher the household income, the more likely there is to be some retirement savings, according to the Federal Reserve report. In households with an annual income under $40k, savings goals are more likely to be for emergencies. But with incomes over $100k, retirement savings becomes more of a goal.

Some people plan to continue working through retirement, which can help provide a better retirement lifestyle. Lower-income people report that it’s harder to get by, and saving is more than a little challenging. Only 42 percent have any savings at all, while 89 percent receive Social Security benefits.

Group of happily retired people taking a picturePooling resources with friends or family can help all of you live better.

Have Somewhat Less than $1 Million? Here Are 11 Ideas for How to Retire on Social Security Alone

With so many people unable to save and the majority receiving Social Security, it’s obvious that a lot of Americans are making it work. Some certainly struggle. But some do not.

The difference isn’t just about luck, it’s also about lifestyle expectations and a bit of clever planning.

Here are some ideas for how to retire on Social Security alone:

1. Wait to Start Social Security

If you have not yet started your Social Security, the best thing you can do to live more comfortably on Social Security alone, is to wait to claim your benefits.

Waiting means that your monthly payment will be bigger — giving you more money to spend.

If you have reached normal retirement age, which is 66 for people who were born between 1943 and 1959, you can access 100% of your benefits. For each year after that, up to age 70, your benefits increase 8%, meaning you can access 32% more at age 70 than at age 66.

If those benefits are tapped at younger than normal retirement age, they will be reduced based on the number of months you receive benefits before you reach your full retirement age. For example, if your full retirement age is 66, the reduction of your benefits at age 62 is 25%; at age 63, it is about 20%; at age 64, it is about 13.3%; and at age 65, it is about 6.7%, according to data from the Social Security Administration.

Try this Social Security calculator or get 7 insider tips for getting the MOST from Social Security. When you are ready, here is how to apply for your benefits.

2. Share Housing

You’ve probably seen more than one episode of popular 1980s TV show, The Golden Girls. They had a great idea. When you pool your resources in retirement, you can live a whole lot better.

When two or more people share a house and household expenses, the money goes further, whether you’re renting or sharing a mortgage payment. And if you already own your home, there’s one typical expense already out of the way, even if you live on your own.

There are loads of options to share housing and cut this expense:  rent out a room (or rooms) in your house, combine funds to buy a home with other people, or create some other kind of communal living.

Read more about the golden age of golden girl style retirement living.

3. Consider Relocation

Where you live is important. If you follow real estate news, you’ve likely seen how some locations are moving toward housing bubble status. The price of housing outpaces authentic value and average local income, which means a modest house could cost 4 times as much as it would in another, less expensive location.

If you live in a costly area, relocation to someplace where the cost of living is more comfortable is also worth consideration. The sale of a valuable home in an expensive town or state could more than finance a much more modest home in a less expensive area, plus give you a little left over.

Here are 14 tips for downsizing.

4. Live Somewhere with a Temperate Climate

Heating and cooling can be expensive.  Utility bills — especially in the heat of summer and the worst of winter — can be untenable on a tight budget.

Living in a more temperate area means less of a demand on one of the most expensive systems in any home, which is the HVAC unit.
Hand holding a stack of pennies

5. Retire Debt BEFORE You Retire

Before retirement arrives, the less debt you have the better. Paying off debt entirely isn’t possible for everyone, but the less you owe the more you’ll pay out. This applies to credit cards as much as it does your home and vehicle.

The NewRetirement Retirement Planner will  let you see what happens to your finances with and without debt.  It can be pretty interesting to  model your own situations and experiment with different debt repayment plans.

6. Consider Taxes

Choosing a new home in a state that doesn’t tax Social Security benefits can also help. AARP says that Alaska doesn’t tax Social Security, plus they pay out oil deposit royalties to residents every year that might offset the higher utilities. Florida, Washington and South Dakota are Social Security friendly, too.

However, the key is looking at the grand picture and not any single factor. A location with moderate housing prices might also have high taxes. So some homework is in order before making any life-altering changes.

Check out the most tax friendly states for retirees.

7.  Prioritize

Living on Social Security without any other income may make it impossible to do everything you want.  However, retirement is an excellent time to take stock of what you  have and what you want — you may just need to prioritize your wants.

If you know what is most important to you, you can set goals and  figure out a way to achieve your number one priority…

8. Plan

It is very useful to get a clear understanding of exactly:

  • How much you earn or will be earning
  • How much you spend or will be spending in retirement
  • Any financial assets you have and how you might be able to use them for retirement

You will want to consider your finances both now and well into the future.  A simple retirement calculator can give you quick answers.  Better yet, use the NewRetirement Planner to create a detailed and reliable long term plan for your financial future. It is a proven method for getting on track and feeling confident about your money.


Knowing exactly what you have and exactly what you need can enable you to make it all work.

9. Cut Expenses

Try keeping a record – in a notebook, a spreadsheet, a software program or on your phone – of EVERY dollar you spend. Many people are surprised to learn how much little things add up over the course of a month.

Documenting your expenses might also help you see services you can cut.  Do you need all those cable channels?  Can you add milk to plain coffee instead of ordering a latte?

One big expense that might be a budgeting opportunity is transportation.  Did you know that transportation is one of the highest retirement costs? Get ideas for cutting money spent on your car and getting around.

And, here are 20 more ways to cut retirement costs.

10. Consider Assistance

There are quite a few programs to help low income seniors.  Research indicates that only 25 percent of eligible seniors apply for benefits that are available.

Explore some of the low income options.

11. Stay Healthy and Make Good Insurance Choices

Some retirees spend more in their lifetime on out of pocket healthcare costs than they earn in Social Security.  You can do a lot to cut those costs by staying healthy and by choosing Supplemental Medicare Coverage carefully.

Shopping around for the best supplemental Medicare plan should be done every year.  Plans change.  Your health needs change.

Bengen Was Wrong. You don’t Really Need a Million Dollars to Retire

Social Security is meager, but with the right plan, you can make it work.

So, why do so many people think that a million dollars is necessary for security in old age?

Well, a lot of the calculations and assumptions used by Bengen and other financial planners are not at all  applicable to most Americans.

Bengen, theorized that retirement advice many people adhered to was flawed. At that time, a mortgage calculator was the usual instrument for calculating what a retiree would need, according to Stanford University retirement financial planning experts, Jason Scott, William Sharpe and John Watson.

In a report by Scott, Sharpe and Watson titled, “The 4% Rule – At What Price?” they explain that Bengen’s plan assumed a retiree’s assets were spread among stocks and bonds. More than that, he assumed that retirement spending was a fixed thing funded by a 4 percent portfolio withdrawal.

So the logic was that with the right portfolio mix and the right rate of withdrawal, retirees would arrive at their ultimate savings goal and retirement income budget.

Bengen’s plan was based on what he saw as “historically sustainable.” But the allocations to investments came at a big risk. His plan required that as much as 75 percent of a retirement portfolio be dedicated to risky stocks. According to financial writer, Rob Berger for Forbes, a million in this type of plan with a 4 percent withdrawal rate would provide a $40k annual retirement income without touching the nest egg.

Over the long haul, stocks do tend to balance out in performance. But the safety assigned to his plan was based on the historical performance of a relatively small number of examples. There are no guarantees, and the Stanford authors explain that it’s unnecessarily wasteful.

And that doesn’t touch on people who can’t invest at all; those who must rely on Social Security.

A Lot of Financial Advice is Wrong for Most Americans

Aside from the risk associated with such a broad allocation to stocks, there’s another problem. Many people don’t have a pre-retirement income that could develop a million-dollar portfolio in the first place. And many expect to receive Social Security.

If you have assets, you do need to worry about how to safely withdraw those assets for retirement, but common guidelines like the 4% rule are flawed and not widely applicable.

Learn more about the problems with the 4% rule and personal finance rules you should break for a wealthier future.

You Can Make Living on  Social Security Alone Really Work!

Traditional retirement advice just isn’t feasible for a lot of Americans, but living off Social Security alone really is possible. It’s all in how you approach it. The overarching themes cutting expenses and living modestly.

For some, that might mean living in a more communal setting with expenses shared among more than just one person or one couple, and perhaps taking a part-time job if necessary. For others, maybe a suite or apartment at the home of an adult child is the answer. Or maybe the best thing to do is retire in place and whittle down on what you normally spend. Pay off debt, and pinch pennies.

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