At the height of the Great Depression, United States Congress enacted several groundbreaking laws that have irrevocably changed the American landscape. One such law passed in 1935 created the Social Security Administration (SSA). The SSA administers the Social Security program, which is perhaps the most successful program in the fight against poverty. Social Security provides financial assistance for disabilities and retirement. Retirement benefits are calculated by examining the amount of money earned during the 35 years when an individual generates the most income.1
Conventional personal finance says you cannot live in retirement on Social Security alone. Let’s debunk that myth by reviewing the nine tips that can help you retire on Social Security.
1. Patience Is a Virtue
The SSA considers full retirement age to start at 66.
If you dip into your Social Security funds at the earliest possible age of 62, you can expect to receive reduced financial assistance throughout the time that you earn retirement funds. As such, waiting until the mandatory withdrawal age of 70 boosts your payouts substantially for retirement funds.2
You do not have to move to Florida once the retirement clock starts to click, but you should consider moving to a part of the country that has an affordable cost of living.
Social Security retirement benefits come in the form of fixed payments. Economic factors such as inflation can eat away at your earning power. You also have to consider the level of taxation that state and local governments impose on residents.
Also, simply moving to a mild climate can save you a considerable amount of money in utility bills.
3. Reduce Debt Before Retirement
One personal financial tip remains relevant well into retirement: The less debt, the better. Even if you cannot pay off your entire personal debt, taking care enough of most of it before Social Security payments kick in makes a huge difference in the quality of your life in retirement.
Reducing debt is especially important for credit cards that require you to pay a high rate of interest.
4. Roommate Wanted
Another economic reality can be summarized in one sentence. Sharing a home decreases your financial obligations.
No, we are not talking about living with multiple roommates, as depicted in the popular 1980s television show, The Golden Girls. We are talking about living with one person who shares many of the same demographic attributes that you bring to the table.
Once again, minimizing costs is the key to living in retirement on a fixed income.
5. Be Prepared
Retirement does not sneak up on you. The age when you decide to retire should be a decision that you make years in advance of leaving the workforce. This means you have time to put into place the foundation of a plan for retirement.
You need to calculate how much money you expect to earn in retirement, as well as create an itemized list of expenses. Deciding what you plan to do with any valuable assets is another financial matter to consider before you retire.3
6. Make a Little Money
You do not have to check out of the workforce when you retire. Millions of retirees from full-time jobs take on part-time roles in the workforce after they leave their retirement parties. Just make sure to understand the financial implications of working a part-time job after you leave behind a full-time one.4
7. Minimize Expenses
We are returning to one of the most basic personal finance principles that applies to everyone — minimize expenses. While you do not have to make coupon cutting your next full-time job, you should closely monitor what you spend and why you are spending it.
Do you really need to plunk down five bucks a day for a latte from Starbucks? Is dry cleaning a necessity now that you are out of the office? Can you forgo driving everywhere a few times a week by taking public transportation?
These are just a few of the tough questions you need to ask when it comes to expenses.
8. Financial Help Is Not a Sign of Weakness
When you reach the golden years, the financial spigot turns on in the form of public assistance. Most seniors either do not apply for benefits or they do not know about their eligibility for receiving financial benefits.
You just need to know where to look for financial assistance in retirement.5
9. Maintain Good Health
The last thing that you want to do is to spend more money on out-of-pocket healthcare costs than you receive in Social Security retirement benefits. Whether you join a gym or participate in yoga classes, staying healthy in retirement can enrich you financially.
The Bottom Line
You might not hear CNBC’s Jim Cramer say it, but you can enjoy a productive life in retirement by living off Social Security retirement benefits. You simply need the know how to take care of your money when you reach your golden years.