Financial Mistakes: Planning to Live on Social Security

I know some pretty frugal people. They can live on very little money yet manage to enjoy every moment of life to its fullest. Now I must say that frugal living is fantastic: below-means living can be one of the best ways to make dollars stretch, to pay off debts and to save for a rainy day. But planning to live very frugally in retirement can be a recipe for disaster. Why? Well let’s take a look.

The Frugal Retirement Myth

Some people believe that once the house is paid off, retirement should be a breeze. I’ve known people who have completely shunned saving for retirement simply because they had no debts and have paid in countless dollars to Social Security. In essence, they expected to live on Social Security as they aged.

Makes sense, right? Really, who couldn’t get by on $1,200 per month if the only bills coming in were gas and electric, the only other expenses fuel and food? Honestly, if that were the case for me right now, I could live on this with plenty to spare. However, the Golden Years aren’t always golden.

The Golden Years

Unfortunately, retirement isn’t entirely filled with cheesecake and coffee, as reruns of the Golden Girls may lead you to believe. Those bodies with a few miles on them? Well, they just may need a little more TLC to cover a couple extra health concerns that come with age. And those new expenses can really add up, especially when factors like hospital visits, surgeries, medications and extended care facilities begin to pop up.

The $1,200 in Social Security that may have gotten you by in your younger days just won’t stretch as far when the medical bills begin to pile up in later retirement years. So what’s a future retiree to do? Why, supplement that SS with a little retirement savings, if possible. Sock away as much as you can now to ensure your Golden Years can be comfortable.

Close to Retirement with No Savings in Sight

Those who may have planned all along to live off Social Security through retirement may not have the luxury of starting to save now. In this case, saving some SS cash along the way in early retirement may help supplement later years, but if you are willing and able, returning to work part- or full-time could be an excellent way to earn a little more money for the later Golden Years.

If you are able to do so now, you could save your family from undue stress. Truly, asking your children to cover your medical expenses while they raise their own kids can become a strain in their lives. And it could possibly strain your relationship.

Do Not Depend on Your House or Social Security

Many people think that owning a home can supplement the Social Security if they ever needed money in later retirement. If you own a house, you can always sell it, right? Unfortunately, this is not always the case. Some houses can sit on the market for months or years, especially if the maintenance became impossible due to later-life health concerns. Depending on the sale of your home to pay your medical bills could become a problem for your family members.

Additionally, depending on Social Security to continue may be a mistake as well. For years, the government has discussed quashing SS; it’s expensive to maintain, especially with Baby Boomers coming down the retirement track. Any moment now, SS could disappear, leaving those who plan to live on it in the dust.

Overall, paying in all that money to Social Security can lead many people to envision a retirement funded entirely by SSI. Unfortunately, with rumors of Social Security’s end and with health care costs, planning to live out the Golden Years solely with the Social Security investment can be an unwise move. But taking some time now to save for the later years can better prepare anyone for the unknowns in life.

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