It’s important to build a retirement nest egg so you have income outside of Social Security to pay the bills. But not everyone is able to come into retirement with money set aside in a savings plan. And so some seniors inevitably wind up having to depend on Social Security as their sole income source.
If you’re wondering whether it’s possible to get by only on Social Security, the answer is technically yes. But it’s probably a scenario you’d rather avoid if possible.
A very limited income stream
The average senior on Social Security today receives a monthly benefit of $1,657. That amounts to an average annual income of $19,884.
Clearly, that’s not a lot of money. And even if you expect to live very frugally in retirement and keep your costs to a minimum, you might struggle immensely if you’re limited to a monthly income of $1,657.
Consider this — in 2022, the standard monthly Medicare Part B premium is $170.10. That’s more than 10% of your monthly Social Security benefit right there, and that’s just your premium — it doesn’t account for coinsurance and copays for the specific treatments and medications you need.
Furthermore, while you may be mortgage-free in retirement, even a very inexpensive property tax bill might still have you paying a few hundred dollars a month. And that doesn’t include what you’ll spend on homeowners insurance and maintenance.
As such, while you can technically try to retire on Social Security alone, it’s not advisable. A far better bet is to amass some level of savings so you have an additional income source to fall back on. If that’s not possible, you can plan to work part-time in retirement to boost your monthly earnings. But the key is to do your best not to limit yourself to Social Security alone.
What if you’re stuck?
You may have reached retirement without any money in savings, and you may not be able to work due to health issues or other constraints. If that’s the case, do your best to stretch your Social Security benefits as much as you can.
First, commit to a frugal lifestyle. That means meal-planning and coupon-clipping, and spending little to no money on leisure. (The good news, though, is that you may have access to plenty of free entertainment, from your local library to events at your community center. And hiking or walking in parks shouldn’t cost any money, either.)
Next, see about relocating. If you move to a part of the country where living costs are cheaper across the board, you may be able to get a lot more for your money.
You may also want to consider moving in with family to save on living costs, if that’s a possibility. Multigenerational households have become more common in recent years given the high cost of housing. And that’s an option that may not only benefit you, but also, younger members of your family who are feeling cash-strapped.
Retiring on Social Security alone isn’t something you should plan to do. If it’s a scenario you get stuck in, do your best to make the most of that income — even if it means making some hard choices along the way.