For whatever reason, not everyone can save money for retirement. As a result, these retirees will depend on monthly Social Security checks to live. If that’s you, consider learning how you can get the most of this benefit and lowering your expenses wherever possible.
US News My Money offers four tips for what to do if Social Security will be your primary income source in retirement.
Pay Off Your Mortgage Before You Retire
More than likely, your mortgage will eat up most of your budget. If you can pay it off while you still have other income, you can use your Social Security money for other expenses.
Wait To Claim Your Benefit
The size of your monthly Social Security check can significantly differ depending on when you claim this benefit. If you claim them before 66, the full retirement age, you will see much smaller payments. For example, if you claim at 62, your check will be 25% smaller than someone who waits until they turn 66.
Timothy Hayes, CFP and Landmark Financial Advisory Services president, told US News My Money, “If you think you are going to die young and you need the money, there are people who choose to draw money early. I usually encourage people to at least wait until their full retirement age because if they draw before that, they are going to draw a permanently reduced benefit for the rest of their life. “
On the other hand, if you wait until 70 to claim your benefits, you could see a 32% jump in your monthly payments. That’s because benefits grow every month you don’t claim up until age 70. Alicia Munnell, who directs the Center for Retirement Research at Boston College, suggests, “You definitely should try to defer taking your benefit as long as possible. You are getting a source of inflation-protected income that lasts for life.”
Maximize Survivor’s Benefits
When a spouse passes away, the surviving partner will have to survive on one Social Security payment. However, depending on the amount that the deceased received, the surviving spouse may see a change in their monthly check. That’s because the surviving partner will get a sum equivalent to the bigger of the two payments.
The spouse who earns more has a health condition or has a shorter life expectancy will want to consider the survivor’s benefit their spouse will receive after his or her death. John Palmer, a professor at Syracuse University, explained, “If you are in a situation where you can’t afford for both of you to delay to age 70, you want to have the person with the higher benefit delay to age 70. Then the survivor’s benefit will be higher if the other spouse dies.”
Move To A More Affordable Area
If you’re willing, consider moving to a part of the country with a lower cost of living. While this idea comes with its own costs, it can help you stretch your Social Security benefits further. Charles Zhang, a certified financial planner at Zhang Financial, noted, “If people live in a very expensive place when they retire, they can cash out their house and exchange to a below-national-average price house and have a very comfortable retirement.”
You may not even need to move to a different state. Finding a more affordable home in your area could be just as effective in lowering your home bills.
- Brandon, Emily. “7 Tips to Live Well on Social Security Alone.” U.S. News & World Report, U.S. News & World Report, 9 Mar. 2020, money.usnews.com/money/retirement/social-security/articles/tips-to-live-well-on-social-security-alone.