Successfully Budgeting When You Rely On Social Security Benefits

Budgeting when you’re on Social Security ensures you can live comfortably knowing that all your financial commitments are covered. If you’re one of the 67 million Americans that currently receive Social Security benefits, then the recent cost of living adjustment (COLA) of 8.7% will have been welcomed with open arms. But it’s important not to expect COLA adjustments or let them affect your budget, as they’re not guaranteed and next year’s COLA is likely to be less than 3%. So, how do you budget for everyday life when the cost of almost everything is rising?

Consider All Your Income

On average, people on Social Security receive $1,781.63 every month. For some people, this will be their only income, but others will also have money from a part-time job, pension, interest, or dividends to consider. Take note of all your income so you can budget accordingly. Start by focusing on essential expenses first, including rent or mortgage payments, utilities, insurance, and groceries. Then, you’ll know what you’ve got left for non-essential items and luxuries. Be prepared to adjust your budget throughout the year to take into account additional expenses. People tend to spend more in winter due to heating costs, thanksgiving, and Christmas. Meanwhile, irregular interest payments will temporarily increase your budget, but should only be taken into consideration when they’re due.

Boost Your Budget

In the US, the average cost of living for a single-person household is $3,189. It’s fair to say that, for many, the average Social Security check isn’t enough to survive on. Therefore, finding ways to boost your income is recommended to help increase your budget. This could involve taking on a part-time job or doing seasonal work throughout the year. Renting out a room or your driveway can help too. It’s also worth doing things like this when you’re waiting to be approved for Social Security. Disability Secrets reports that on average people wait 27 months for approval. This is because 80% of Social Security applications are initially rejected and claimants have to go to court. Social Security administrative hearings will then take place in front of a judge. Their job is to review all the evidence and cross-examine you before providing a written decision.

Track Your Expenses

Do you know how much you spend on groceries, power, and fuel each month? Most people will have a figure in their head, but the actual amount is likely to be more than this due to ever-growing price rises. For example, in 2022 food prices increased by 9.9% and this year they’ll go up by a further 6.6%. The first thing you should do is categorise your expenses into topics, such as housing, food, healthcare, and so on. You can then go deeper and subcategorise by listing how much you spend on things in each category. So, for healthcare, this may include health insurance, prescriptions, over-the-counter meds, and similar. By doing this, you’ll get a clear picture of all your expenses and it will help you to identify which expenses you could cut.

Social Security is an essential income for many. But it’s often not enough to live solely on which is why careful tracking, budgeting, and additional income streams are needed.

13 Tips On How To Start Planning For Your Golden Years

It can be difficult to think about retirement planning, but it’s important to take the time to find the solutions that work best for you. You will be more prepared in the future if you plan more today.

Consider the following to aid in your beginning:

1. Pay Off Debt Before Retirement

Getting out of debt should be a priority before entering your golden years, especially if those debts have high interest rates such as credit cards or student loans. Prioritise paying off the highest-interest debts first and work towards eliminating all other forms of debt before retiring.

2. Calculate Expenses During Retirement Carefully

Create a budget that takes into account what kind of lifestyle you desire during retirement, as well as potential medical or living expenses. Consider what kind of income you will receive from sources such as Social Security, pensions, and any other investments that provide regular pay-outs.

3. Take Full Advantage of Employer 401(k)s and IRAs.

Employers often match a portion of your contributions to your 401(k), so make sure to take full advantage of this benefit if it is offered by your company. Additionally, explore other savings options like traditional IRAs or Roth IRAs to save up for retirement in the most tax-advantaged way possible.

4. Reassess Risk Tolerance Over Time

As you get closer to retiring, it’s important to adjust your investment strategy according to how close you are to needing that money. Take a look at your portfolio and make sure it supports the lifestyle you want during retirement without taking on too much risk. Make necessary adjustments as needed in order to protect your investments.

5. Consider Long-Term Care Insurance

Long-term care can be pricey, so having insurance can help provide financial assistance if needed later in life. Research different policies and determine which one best meets your needs in terms of coverage and cost.

6. Maximise Social Security Benefits

Estimate when you will be eligible for Social Security benefits, and explore ways to increase your benefit amounts such as delaying when you claim them or working longer than normal before retiring. Taking full advantage of Social Security is essential for a solid retirement plan.

7. Look into Housing Options

Explore different housing options that fit your budget and lifestyle, such as downsizing from your current home or relocating to an area with a lower cost of living. Consider all benefits and drawbacks before making any decisions about where you want to live during retirement.

8. Research Medicare Plans Thoroughly

Make sure you understand the different parts of Medicare and how they apply to you so you can choose the best coverage plan for your needs. Keep in mind that some costs are not covered by Medicare, so make other arrangements to cover those expenses if needed.

9. Take Advantage of Tax Breaks Available to Seniors

As a retiree, there are multiple tax deductions you may qualify for, so be sure to research them thoroughly and consult a tax expert if needed. Examples include deductions for medical expenses, pension contributions, Social Security income, and more.

10. Stay Physically Active

Exercise and physical activity can help ease aches and pains that come with aging, boost moods and energy levels, fight off chronic illnesses, and improve overall health as you age. Consider doing moderate exercise such as walking or swimming several times a week to stay healthy in your golden years.

11. Maintain Strong Social Connections

Make sure to keep up with family members, friends, neighbours, former co-workers, or other people in your community who provide emotional support during retirement. Participate in social activities whenever possible to stay connected and engaged with the world.

12. Get Help From an Estate Attorney

An experienced estate attorney can provide invaluable guidance on how to properly manage your finances and assets during retirement, including setting up trusts and other legal arrangements for heirs or beneficiaries should something unexpected happen.

13. Take Care of Your Mental Health

Retirement can sometimes lead to depression or anxiety due to the lack of structure or social interaction compared to working life. Combat these feelings by engaging in activities that bring you joy and reaching out to family or friends if needed.

It’s also important to stay up-to-date with changes in benefits, taxes, and other aspects of retirement planning that may affect your finances over time. This ensures that you are taking advantage of any beneficial opportunities available and protecting yourself from potential financial risks in the long run. Taking time now to understand your options helps ensure that you will have a secure future during your golden years.