If you or your spouse are 62 years old or will be soon, social security is likely on your mind. A social welfare program run by the Social Security Administration and one of the oldest assistance programs in the United States, Social Security is a staple for providing assistance to those who have retired, those who may be disabled, and those who have had loved ones pass. And though controversy does surround the program, it is still active.
In fact, in 2016 alone 24 percent of the federal government budget was applied to Social Security. The average benefit during that year was $1,360. In December 2017 it was shown that working Americans took home a median monthly salary of $3,714. That's a difference of over $2,000. And while some of the money made while working should have been put towards savings and retirement, such a large difference can have major impacts on quality of life, services available, and future outlook.
The latter stages of life are meant to be spent in relaxation and enjoyment. That's what Social Security was originally developed for. You can't work your entire life. There must be some reward at the end.
But what are you to do when it comes to establishing a budget on social security? With such a big difference in monthly income, it may be hard for many to see financial success or happiness as they age. It's not getting easier, either. Housing costs are rising, food is getting more expensive, and much of life in general requires more dollars.
If you or your spouse are eligible for Social Security, here are some tips on how to adjust your budget.
Hold out as long as you can
There's no need to fear Social Security suddenly vanishing. Though younger generations may have stresses related to the program dissolving, Social Security is going nowhere in the next few years. That's why you should feel confident in waiting as long as you can to take advantage of it.
As you may be aware, you are eligible for social security at the age of 62. You may be tempted to take it right then, but unless you have any strenuous circumstances you should hold out as long as possible- at least until the age of 70. Why is that?
Between ages 62-70 your Social Security payment increases. The amount it increases is around 7 percent per year, a substantial increase, considering. Waiting until you are 70 is especially important if you are the breadwinner in your family. Since the amount you receive will increase the most between ages 62 and 70, you will see the most benefits. Should your spouse make significantly less, it may be strategic for them to take their social security earlier, providing peace-of-mind when it comes to finances.
If you're single the advice is to wait until 70 if you can, though there are circumstances that may require you to take it earlier. Health, financial and personal being just a few. But if you find yourself in good health, have a decent amount of savings, and can weather the storm until a later age, do so.
Don't rely on Social Security
Setting yourself up for success in retirement and when taking Social Security starts long before the age of 62. It starts when you earn your first dollar.
Social Security should be supplemented with other financial resources. These include 401(k) plans, IRAs, high-return stock investments, and other methods of savings. The more you diversify your savings portfolio the greater the chances are for financial success in the future.
If you do have other sources of income alongside Social Security you should establish a total monthly income and budget appropriately. Make a spreadsheet or document that tracks where your income is coming from so you can best budget for necessary and future expenses.
Another way to take the burden off relying on Social Security is to consider a part-time job. Though working more may be the last thing on your mind, a part-time gig may give you the needed room to enjoy the later stages in life. Make this part-time position something you enjoy. Think about what makes you happy and find ways to monetize it.
Plan to downsize
If you've been strategic with your finances throughout life then you may be in a housing situation that finds you without a mortgage payment. In such a situation you will be able to stretch your Social Security dollar further. Unfortunately this does not apply to all retirees out there. In fact many still have housing costs, whether through a mortgage or rent.
That's why when it comes to housing costs when you are on Social Security you should look to make them as minimal as possible. Chances are you no longer need as much space as before. Consider downsizing your apartment or house. Ask your family if a multigenerational household situation may be appropriate. Wherever you can, save.
Save for the unexpected
There's no denying it. As we age the chances of unexpected, tragic events increase. Death is not something we can avoid. Morbid as it may seem, the years in which we are eligible to take Social Security are also the years in which we are more prone to dying or suffering significant health setbacks.
These can have major impacts on not only yourself but on your family as well. That's why it's important to set aside a portion of each Social Security paycheck to cover unexpected health costs. Having this savings set aside will help in case of emergency. If no emergency occurs then all the better! You and your family now have a little more money set aside to spend on future luxuries.