How to Have a Comfortable Retirement on Social Security Alone

Is it possible to have a comfortable retirement on Social Security alone? This is a necessary question, because although saving for retirement should be at the top of your financial to-do list, for many Americans it often ends up slipping through the cracks. According to PwC’s 2016 Employee Financial Wellness Survey, 33% of bqby boomers say they’re worried about running out of money in retirement, while 47% of all workers have less than $50,000 tucked away for their later years.

Social Security is one way to supplement retirement income when your savings fall short, but it only goes so far. As of May 2018 the average monthly retirement benefit was just $1,412. If you’re headed toward retirement with a nest egg that’s smaller than you’d like, you’ll need a game plan for making do with Social Security alone, so let’s see what we can come up with.

Nearly nine out of 10 Americans aged 65 or older currently receive Social Security. The Social Security Administration estimates that 21% of married couples and 43% of single seniors rely on Social Security for 90% or more of their income. According to a 2015 Gallup poll, 36% of near-retirees say they expect Social Security to be a major source of income once they retire. (For more, see How Social Security Works After Retirement.) 

Income and the time frame to save for retirement seem to be major factors in determining who’s going to be more dependent on Social Security. In the Gallup poll, for example, 48% of non-retirees aged 55 and older and 45% of those making less than $30,000 said that Social Security would account for a large chunk of their retirement income. (For more, see Top 6 Myths About Social Security Benefits.) 

When Social Security is your primary or only source of funds in retirement, it takes some creativity to make those dollars go further. Certain adjustments can help you to navigate retirement without leaving you broke. Here are four concrete steps you can take.

Housing costs can easily eat up your Social Security benefits. The Bureau of Labor Statistics estimates that seniors aged 65 to 74 spend approximately 32% of their household income on housing each year. That amount climbs to 36.5% at age 75. 

Trading in your current home for something smaller can help to cut down on what you’re spending. A reduction of even $100 a month could make a significant difference in the type of lifestyle you’re able to maintain. Reading Avoid the Downsides of Downsizing in Retirement can help you handle this decision intelligently. If the numbers really don't work out well in your current location, consider moving to a region with a lower cost of living (See Least Expensive States to Retire In) – or even moving abroad (Retirement Funds Too Little? Retire Abroad).

If you’ve managed to make your housing more affordable, the next step is reducing or eliminating other household spending. If you’ve got credit card debt or a car loan, for example, you’d want to get those paid off as quickly as possible. Then you can move on to cutting down things such as your utility bills, transportation expenses and food budget. (For more, see 5 Ways to Stretch Your Retirement Budget.)

The key question that you must ask is what do you really need to have an enjoyable retirement and what can you live without? Could you ditch cable TV, for example, in favor of watching TV online (see The 4 Best Ways to Cut the Cord) or pursuing a low-budget hobby? If you own two cars but you and your spouse are both retired, could you sell one of them? These kinds of decisions can be tough, but they can make your transition to retirement on Social Security a much smoother one in the long run.

Healthcare is another potential trouble spot for which you need to plan, especially if you have an existing medical condition. While Medicare can cover some of the costs beginning at age 65, it doesn’t pay for everything. If you’ve retired and your income is exclusively coming from Social Security, you’ll need to look beyond Medicare to pay for your medical expenses.

Medicaid, for example, is available to low-income seniors, and you can have this coverage along with Medicare. It’s designed to pick up the tab for things Medicare doesn’t cover, including long-term care. State-sponsored Medicare Savings Programs help with the cost of Medicare premiums, while the Extra Help program helps with prescription drug costs. Just keep in mind that your ability to qualify for these programs is based on your age, income and in some cases your disability status. (For more, see Medicare 101: Do You Need All 4 Parts? and 10 Best States for Affordable Senior Care.)

Normal retirement age is 67 these days for most seniors, but you can begin taking your Social Security benefits as early as 62. The problem is that if you do so, you’ll see your benefits reduced for each year you take benefits ahead of schedule. 

On the other hand, if you can put off taking your benefits past full retirement age, you’ll see your monthly benefit check increase. For someone who was born in 1943 or later and waits until age 70 to apply for Social Security, the increase should come to 8%. Those extra dollars could come in handy if you don’t have any other retirement money to fall back on. 

Social Security isn’t a substitute for building a solid retirement base, and if you’ve still got time before you retire, consider looking for ways to shore up your savings. Start by chipping in as much as you reasonably can to your employer’s retirement plan, especially if it comes with a matching contribution. If you don’t have a 401(k) or similar plan at work, an individual retirement account (IRA) is another way to grow your savings. The more you set aside now, the less pressure you’ll feel to make your Social Security benefits stretch.

Nevertheless, if you have to stretch your benefits, cutting overhead, controlling health care costs and delaying taking Social Security can make a big difference. For more ideas, see Retirement Strategies for Low Income Seniors.