Many retirees are struggling because their Social Security benefits aren’t enough. If this is your situation, here’s what you can do.
Retirees are struggling, and they are worried things are going to get worse. At least that’s what recent data from a Nationwide Retirement Institute survey shows.
According to the research, 52% of current Social Security recipients said they’ve had to cut back on their discretionary spending because increases in their living costs have outpaced increases in their retirement benefits.
Even worse, 31% said they’ve reduced spending on essentials like medicine and groceries.
If you’re struggling and your benefits are not covering your needs, it’s important to come up with a plan. These tactics could help you to make ends meet even when Social Security is simply not cutting it.
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1. Make cuts to a fixed expense
One of the best things that you can do if you fear your Social Security benefits aren’t going to go far enough is to try to cut a fixed expense.
Fixed expenses are the ones that don’t typically change every month. They can initially be harder to cut than discretionary spending, which many people are already cutting back on, but they can make a long-lasting difference, and a major difference at that.
Say, for example, that you could downsize your home and reduce your $2,500 mortgage payment to $1,000 per month in a cheaper place. You’ve just freed up $1,500 every month, and you did it once with one big lifestyle change. That’s a whole lot easier to sustain than trying to cut your budget to the bare bones and give up all luxuries indefinitely for years on end.
Other examples of fixed expenses you may be able to cut include:
- Loans or credit card bills, if you can refinance to a cheaper rate
- Insurance costs, if you can raise your deductible or qualify for discounts you didn’t know you were eligible for
- Property taxes, if the value of your home has declined (you can appeal its valuation to try to reduce its assessed value)
- Streaming services and other subscriptions
- Electricity costs, by turning your thermostat up or down depending on the season, weatherproofing your house, or using power strips to stop phantom energy use
2. Track your spending and try out different budgeting methods
Tracking your spending is another great tactic, as you can identify areas where you may be overspending that you may not have even been aware of. Once you figure out where your money is going for a few weeks, you can get a good idea of what you’re splurging too much on, and then set yourself some limits by making a budget.
There are several different budgeting techniques worth trying, including:
- An envelope-based budget: You decide what you want to spend, put that amount in an envelope, and stop spending on that category when the cash is gone.
- A detailed budget: You assign every dollar to a category on a spreadsheet, or use a budgeting app.
- A 50/30/20 budget: You limit fixed expenses to half your income, keep discretionary costs at 30%, and save the rest. Since you’re already retired and not saving for that, you could even do a modified version and aim to save 10% for emergencies and big purchases.
The right budget can help you use your money wisely so it stretches further.
3. Try some part-time work
The final option worth considering is giving part-time work a try.
Bringing in extra income could cut a lot of your financial burden and, depending on how much you can earn, could potentially even increase your future Social Security benefits if you make more now than you did at an earlier point in your career. That’s because your benefits are based on average wages in your 35 highest-earning years.
If you’re under full retirement age (FRA) while working, you do need to be aware of the rules affecting your situation. Specifically, working while collecting Social Security could lead to a temporary reduction in benefits. However, that’s not necessarily a bad thing, as your benefits would be recalculated at FRA to account for the income you didn’t collect, and they’d be higher as a result.
By trying out these techniques, you can better cope with a financial situation in which your Social Security simply doesn’t stretch as far as you’d like.