It's never too early to start learning how to live well
while living on less.
Marilyn Lewis • December 8, 2020
So, your retirement plan
is to live on your Social Security? It might work. Much depends on the size of
your checks and your lifestyle.
Bear in mind, though,
that the maximum you can
expect to earn from Social Security in 2020 is about $3,000 a
month if you claim benefits at full retirement age (66 and up,
depending on your birth year).
Most people don’t get
that much, though. The average benefit among retired workers is about $1,500.
If you are counting on those benefits checks to cover all your expenses in
retirement, it’s never too early to start planning how you’ll make it work.
These ideas and tips can help.
1. Eliminate debt before you retire
What’s your biggest debt?
For many (if not most) of us, it’s a mortgage. In some cases it
can be smarter not to pay off a mortgage early. Retirement is not typically one
of those cases, though.
In fact, we identified seven
situations when it’s smart to pay off the mortgage. Retiring —
you guessed it — is one. When your income is fixed and you don’t have much
coming in each month, paring back housing costs buys precious financial slack.
That goes double if Social Security will be most of your income.
2. Cut out-of-pocket medical costs
Wait, doesn’t Medicare
cover your medical costs? Well, yes and no. It covers most costs. But you still
can end up with hefty bills for copays, deductibles, insurance premiums,
prescription medicines and services not covered by Medicare.
Medicare beneficiaries
spend around $5,801 per year on average for out-of-pocket
health care costs. For those 65 and older, costs are even steeper: $6,089.
All right, you’re
convinced. But how to cut those costs? Start by comparison shopping at these sites for
discounts and coupons on prescription drugs.
·
Comparison shop before having a procedure done to be sure your
insurance covers all the practitioners and services involved.
·
Negotiate high charges and fees with hospitals and clinic
billing offices and ask for a cash discount.
·
Take full advantage of a flexible spending account (FSA) or health
savings account (HSA).
·
Learn more about cutting Medicare
costs.
3. Emancipate your adult kids
If you don’t have the
resources to live well on your own, it’s time to cut free
any adult children who still are attached to your purse
strings. You will need that money, and your kids still have time to earn and
save.
Give them plenty of advance
notice and set a firm deadline. Explain your financial situation without
apologizing or over-explaining. Tell them what confidence you have in them and
in their ability to care for themselves. Trust them to figure out the rest.
4. Hold off claiming Social Security
Wait at least until full
retirement age (FRA) to claim Social Security. Taking your benefits earlier
reduces how much money you’ll get each month.
Review the pros of
delaying and some reasons for
claiming right away to decide what’s best for you.
If your life expectancy
is short or you aren’t depending on the money, it may make sense to claim
sooner. But for most of us, delaying Social Security pumps up your checks by 8%
per year until you do claim the benefit. At age 70, you no longer get such
increases and there’s no more reason to delay.
5. Look into living where housing is cheaper
Moving where you think
life is cheaper isn’t always the
solution. If moving appeals to you, though, it’s worth considering
as a way to stretch limited retirement income. Whether you relocate within the
U.S. or move abroad, do the research to find a lower cost of living and a
chance for adventure in a new place.
We’ve done much of this
searching for you. Here are:
·
10 places in the U.S. where your Social Security
goes furthest
·
25 best places in
the U.S. to live in retirement
·
10 safe and cheap
countries for retirees
·
10 states where property
taxes are lowest
6. Sell one car
Retirement is likely to
let you slow down. That’s why they call it retirement, right? You may need to
zoom around less, and, if there are two of you, you may no longer need two
cars.
Practice before you
commit by sharing just one car. Experiment by walking more, riding your bike,
hitching a ride with friends, taking public transportation if possible.
Run the numbers to see if
it’s worthwhile. You’ll make money by selling the vehicle, plus you’ll save on
registration, auto insurance, gas, roadside insurance, oil and maintenance.
Here’s what U.S.
households spent on their cars in 2019:
·
Car insurance:
$1,545
·
Gas and motor oil:
$2,094
·
Vehicle purchase:
$4,394
7. Don’t spend a dime for entertainment
You might be astounded at
all the entertainment
that’s free for the taking. You can cut your cable bill and
stream entertainment for free. Stop paying for music and audiobooks. Read all
the books, magazines and newspapers you want at the library or through library
databases online.
Here are a few utterly
free sources of entertainment:
·
Free audiobook
downloads
·
Free access to electronic books
·
Stream movies
and TV at no charge.
·
Take classes online
at Ivy League universities free of charge; find colleges and
universities where seniors attend
tuition-free.
8. Get fit for free
Drop that expensive gym
membership and don’t look back. We’ve found so many
alternatives.
Many Medicare plans
include access to the popular Silver Sneakers
fitness program. Membership is free for eligible seniors 65 and up (check
eligibility here). The program covers free gym
memberships and includes on-demand and scheduled streaming
classes in cardio fitness, balance, flexibility, strength yoga and weights.
If your plan doesn’t include
membership, look into changing your
Medicare plan for one that includes it. In 2021, for
example, 96% of Medicare
Advantage plans will include a fitness benefit. Be careful,
though, to understand the
rules when switching to a Medicare Advantage plan from Original
Medicare.
Protect your retirement with the right financial adviser
Finding a financial
adviser you can trust doesn’t
have to be hard. A great place to start is with SmartAsset’s free financial
adviser matching tool, which connects you with up to three qualified
financial advisers in five minutes. Each adviser is vetted by SmartAsset and is
legally required to act in your best interests.
If you’re ready to be
matched with local advisers who will help you reach your financial goals, get started now.
Disclosure: The
information you read here is always objective. However, we sometimes receive
compensation when you click links within our stories.
https://www.moneytalksnews.com/social-security-increase-comes-up-short-in-2021-study-finds/
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