Five Minute Financial Feature:
When is Social Security Enough?
Question: I need your help. My life hasn’t been easy and I have next to no savings. I turn 65 in a couple of years. If all I have is social security, what can I do to make the most of it?
This is a common question, and a tough situation to be in!
In an ideal world, we would all save a significant portion of our income; our savings would earn crazy good returns, and we would still have our lunch money from fifth grade. Yet, if you spent your lunch money on comic books like most young kids, or God forbid, something went wrong and you are but a few years out from retirement and you do not have enough saved. It’s not ideal, but all hope is not lost.
It will require some extra work and out of the box thinking.
The first thing to do is to create a budget and try to free up as much money for savings as possible.
Sometimes sh!t happens. Life does not always work out as planned: divorce, disability, etc. There are others in this situation – if this is you, do not feel alone. My promise and standard is to help when I can.
Social Security: Is it enough? Sometimes sh!t happens. Life does not always work out. Do not feel alone. My promise and standard is to help wherever I can and find ways to make the dollars stretch. Click To Tweet
If someone is faced with retiring on Social Security alone, it is essential that they select the best filing option. Many individuals I have met with were not aware that they might be eligible to file for benefits off of an ex-spouse’s record, a deceased spouse or even a restricted application.
Consider downsizing: if a retiree has equity in a home, selling the house and moving to a smaller home or a lower cost area can not only free up some funds to produce income and savings, it can also reduce living expenses.
Downsizing may not always be viable; retirees may already live in a low-cost area or may not have enough equity to produce both additional incomes and pay for new living arrangements. In these circumstances, it may make sense to consider a reverse mortgage. Reverse mortgages are controversial, and anyone considering one should do their research and get some independent legal and financial advice.
Reverse mortgages are a mortgage levied against the equity in your home, and a sum of money is advanced to you. You can request more funds when necessary. In most situations, you do not make payments on the money borrowed, but the interest continues to accumulate. If your intention was to leave the house or the equity in the house for the next generation, it is likely there will be no money left, but it may be a good alternative if you are short on cash and long on equity.
Another option is to consider working into retirement or working longer. This may not always be an option due to age or health. One option is to keep working past eligibility to collect social security benefits and use the extra money to boost savings for a few years. The other option is to work into retirement. Even part-time work or seasonal work can help increase the standard of living. A bonus to working at one of your favorite stores like Target is you often receive an employee discount. Plus, keeping active is said to keep the body and the mind young.
There are many ways to look at saving money in the interim, and every penny counts. If you can amass some extra income by working a little longer, selling some unneeded possessions, downsizing your home, reducing your cost of living, and any other way that you can reduce your personal bills, you can get by on less. There are side hustles and work-from-home jobs that you could look into that would help the dollars go a little further, and of course, there are social programs to help that little bit more.
Please reach out for help if you are finding yourself in this situation. The earlier you can start making changes and implementing a plan, the earlier you could be making a genuine difference for your golden years.
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