One of the most common retirement regrets of the elderly is failing to save enough money for their retirement fund. Although we have received a lot of warnings from financial experts and even our own elder relatives, we still failed to put importance in saving up for our retirement money. In fact, in a recent article posted on this site, we discussed how some single parents have chosen to save for college over retirement.
As selfless as it may be, it puts older adults at a disadvantage when the time comes for them to retire. You can expect that the limited income of single parents will put them at a disadvantage compared to households with two parents. It forces them to make tough choices like foregoing their own future just so their kids will have theirs. If you were placed in their shoes, you can understand how difficult it is to let your children be in debt for school if you can save up for it. Most parents would help out their kids even if it means putting your retirement in jeopardy.
An article from WashingtonPost.com highlighted some troubling data from the recent household economic wellbeing survey conducted by the Federal Reserve. According to the survey, 31% of adults say that they do not have money saved towards their retirement fund. They are also not expecting any pension. This percentage included 19% of respondents who are near the age of retirement at 55 to 64 years. Most people said that they just didn’t think about retirement yet. The younger they are, the less they thought about it.
Well if you failed to save up for retirement, your obvious source of funds will be your Social Security Benefits. While this is a guaranteed source of income, the question is, will it be enough?
Is it possible to rely solely on your benefits from Social Security in retirement?
In all honesty, the answer to that is no. According to the basic facts published on SSA.gov, 9 out of 10 retired individuals receive Social Security benefits. The average monthly benefit that retired workers receive is $1,294. 47% of unmarried retirees and 22% of married couples rely on this amount for 90% of their income. Do you really think anyone can live on that in comfort?
For some people, it may be just enough to supply their daily needs. It will be like living from paycheck to paycheck for them. But what if your monthly requirements go beyond the basic needs? Here are three scenarios that will guarantee that your Social Security Benefits will not suffice as your retirement fund.
If you have debt. Obviously, those who retired with debt will have a tough time making ends meet with only your Social Security Benefits. Whether it is your credit cards or your house that is being paid off, your retirement fund will never be enough. It might even cause you to take on more debt just to finance everything you need to pay off.
If you have a sickness. Another reason for your Social Security to fall short is when you have a sickness. The rising cost of health care is way beyond the inflation rate. If you suddenly contract an illness, even with Medicare benefits, you might find that the out of pocket costs will still bury your meager income from social security.
If you have someone to support. Living on this amount alone is tough enough. Imagine if you have to support someone too. It can be your spouse, child or a disabled relative. You cannot hope to feed one more mouth with the retirement fund that you currently have.
Even if you were able to finance what you need during the first few months of your retirement, relying solely on your Social Security Benefits will not be enough after a year or two. If you get an illness or even with the current inflation rate, you can quickly go under in terms of your retirement fund.
How to increase your retirement benefits from Social Security
So what can you do if your retirement looms ahead and you do not have anything saved in a retirement account? Here are a couple of suggestions to help increase your Social Security income.
- Make sure you have worked at least 35 years. Your benefits will be calculated based on the 35 highest earning years of your life. If you do not meet this requirement, some of your years will be computed with a zero income and that can pull down that amount that you are entitled to receive.
- Increase your income. This can be done in two ways. One is to ask your employer to give you a raise and the other is to choose a second job to earn more money. An increase in income should help boost your entitlement for a higher Social Security benefit.
- Wait as long as you can before claiming your benefits. If you continue working until your full retirement age, you should be able to maximize the amount that you will receive from Social Security. If you wait even longer at 70, that should give you a higher monthly benefit.
What to do to increase your retirement money
In case you are already in your retirement, you have no other choice but to financially downsize your lifestyle so the $1,200 benefit will fit your monthly budget.
Here are some of the things that you can do to decrease your lifestyle
- Move to a new state. Retiring on Social Security Benefits in New York will not cut it for you. The high cost of living will bury you. Moving to Auburn, Alabama or Blacksburg, Virginia may be more practical if you have to live on a lower income. These places are ranked as one of the top places to live in when you are expecting to retire on your Social Security Benefits alone.
- Live in a small home. According to the data found on AgingStats.gov, housing costs take up 35% of a retired individuals budget. If you are living on government benefits, that will even become 40%. If you live in a smaller home, your expenses will go down because it is cheaper to heat or cool a smaller home.
- Sell your stuff. Over the years, you have surely accumulated a lot of possessions. Sell them off and put the profits towards a savings account – or more specifically, your emergency fund. If you will live in a smaller home, you have to get rid of your other items anyway.
- Check how you can lower your food budget. Planting your own produce is one of the best ways to lower your food costs. After all, you have all the time in your hands now. Why not go into gardening. It is the healthier alternative and you get to save more in your budget.
- Give up your car. The average cost to own a car is around $9,000 a year. Do you really want to share your small retirement fund with your car? Trade your car for a sturdy bike. It will provide you with some exercise and you also get to protect the environment too.
Your financial goal in retirement is to make sure that your retirement fund will outlive you. All it takes is some changes in your life and accepting that you cannot live the way you did when you still had work. Once you have embraced that, you will realize that living off on your Social Security Benefits do not have to cause you some stress.