There are two groups of people when it comes to the subject of money. One is made up of people who have educated themselves on the subject and are completely comfortable talking about it, spending it, and investing it to grow more money. The other consists of those who are uncomfortable with the subject, avoid even thinking or talking about it, and have never really learned to manage it. For the latter, money can be a confusing and emotional topic.
The standard counsel on building financial security for your later years is that you should have started thinking about saving and investing when you were still young, so you would have a nice nest egg later on. But that advice is a bit overdue when you’re sixty-five and suddenly forced to confront the subject. Like so many people, you may find yourself staring at the end of your work life before you were even prepared to think about your financial situation.
If it’s any consolation, you are not alone. According to a recent Sightlines report issued by the Stanford Center on Longevity (SCL), “The vast majority of Baby Boomers will not have sufficient savings to retire full-time at sixty-five with their pre-retirement standard of living.” If you are part of the Baby Boomer generation and are approaching retirement, you will either need to work beyond age sixty-five, reduce your standard of living, or do some combination of the two. Wrapping your head around those facts may seem daunting, but this is not something you can put off forever.
Many of us over sixty-five have come to depend on Social Security, which is the largest source of income most of us have. If you wait until you reach your full retirement age, you can continue to work as long as you wish and earn as much as you can without reducing your benefit. Social Security certainly makes life easier for many people, but it doesn’t always provide enough to maintain your present lifestyle. If you have figured out how much you will need to live when you retire, calculate the difference between that amount and how much you will receive in Social Security benefits. Then, decide how you are going to cover the gap between those two numbers.
What if you realize you can’t cover that gap? You wouldn’t be alone if you’re worried about outliving your savings or finding that you will be largely dependent on your Social Security. Retiring with no income other than Social Security may sound next to impossible. Yet, 23 percent of married retirees and 43 percent of single retirees count on their Social Security benefit for 90 percent or more of their monthly income. The question is how do they do it? Here are a few suggestions for how they make it work.
- First, be aware of the factors that will determine the amount of your benefits. Assuming that Social Security is your only source of income, if you are not in good health and don’t believe you will live many years in retirement, you are probably better off applying for Social Security benefits sooner rather than later. Staying in your job longer or finding part-time work will help you postpone taking your benefits early or permit you to live on the benefits you receive.
- Do a Social Security Do-Over. If you took Social Security early and now feel that was the wrong decision, you can change your mind. You have up to twelve months to withdraw your application and take advantage of the second-chance option.
- Eliminate debt. This may seem obvious, but if you are in debt and planning to live mostly on Social Security when you retire, you’re going to find it difficult if not impossible to make it work. Make a concerted effort to pay off your mortgage and as much high-interest-rate consumer debt, such as credit cards, as you can.
- Move to a less-expensive location. Downsizing to a smaller place can lower your expenses, but if you want to maintain your present standard of living, consider moving somewhere with a lower cost-of-living where you can live on less money.
- Don’t forget about taxes. Don’t let your tax bill catch you by surprise. Estimate what you think the taxes will be, and put that money aside every month.
- Buddy up. Think about getting a roommate or sharing your home with a friend. This is a good way to cut living expenses and prevent feeling isolated.
- Be aware of helpful state and federal programs. If you are struggling financially, you may qualify for a program such as Extra Help to help you pay for prescription drugs. Find out more information on Extra Help, as well as other state and federal programs, at BenefitsCheckUp, a free service of the National Council on Aging.
- Take advantage of free services.
- Libraries, parks, and local museums offer a variety of free entertainment, including book reviews, free tours of art exhibits, concerts, and even Shakespeare in the park.
- Continuing-care retirement communities, offer residents independent living, assisted living,and nursing-home care at different stages of their lives. Many of these communities open their programs and activities to the public, as well as to residents.
- If you have access to community colleges and universities, you can take advantage of their free lectures and other cultural programs. Most US schools allow older students to attend classes at no charge or at a significantly reduced rate.
- The best news is that, in this age of the Internet, you can take online courses at top universities or community colleges. Contrary to some of the commercials I’ve seen on TV, many of us are computer literate or have grandchildren who are only too happy to teach us anything we need to know about computers.