It’s critical to plan for your senior years, whether you’re 20 or 10 years away from retirement. This means planning Social Security payments for many upcoming retirees.
The 2019 Consumer Expenditure Survey estimates that seniors spend $50,000 annually on needs like food, housing, transportation, and healthcare.
The average monthly Social Security benefit for pensioners is $18,259.08. Those who aim to retire only on Social Security may quickly discover that this amount is insufficient.
Don’t spend all of your Social Security income in one month. As a result, you must carefully budget and use your benefits efficiently.
Even if you are 62 and eligible for Social Security, you are not required to start receiving payments immediately. Some folks can afford to wait an extra eight years.
Why would somebody delay obtaining benefits? It’s all about the money. The longer you postpone, the larger your monthly expense.
Social Security benefits for those born in 1943 or later will increase by 8% per year of deferral up to the age of 70.
Waiting longer to cash your checks can save you money if you don’t need the money right now and have other sources of income or savings.
Check the income record.
To qualify for Social Security, you must have worked for the agency for 35 years. Before applying for benefits, you should examine your Social Security income record for mistakes or gaps.
If your top earning years are not recorded, the Social Security Administration may permanently reduce your payment.
Create an account to check your SSN. In this section, you can verify your earnings history and potential retirement, disability, and survivor benefits. If any problems are found, call 1-800-772-1213.
Plan Your Monthly Social Security Check
According to certified financial adviser Kimberly Foss of Empyrion Wealth Management, retirees should first verify their Social Security check is accurate.
After checking your payment, it’s time to budget.
Before spending any of your Social Security income, develop a budget, advises Bill Kearney, owner of Integrated Financial Concepts. As follows:
Calculate your monthly rent or mortgage, food, healthcare, and other expenses.
Determine your income and where it will come from.
Calculate monthly expenses vs. expected monthly income. Calculate your Social Security benefits versus your pension or retirement withdrawals.
Control your income
Keep an eye on your other income to maximize your Social Security payments. You will lose $1 for every $2 earned beyond $18,960 in 2021 if you are under the full retirement age.
Until you reach full retirement age in 2021, your pension is reduced by $1 for every $3 earned above $50,520.
Social Security benefits do not decrease once you reach full retirement age.
Prioritize Your Essentials First
Next up are your Social Security benefits. Financial guru Leonard Hayduchok advocates treating Social Security like any other paycheck.
Pay your rent or buy food with the benefits money. The average annual food and housing costs for those 65 and older are as follows:
$3,810 for services
Yearly food expenditures $6,599
While many retirees won’t be able to, you should strive to save 60-70 percent of your Social Security benefits each year.
If your annual benefits are $1,521.59 each month, or $18,259.08 per year, then 60% of your Social Security check — or $10,955.45 — will not pay the above fees.
It’s still a good idea to save money for food and housing. After all, these are needs without which you cannot fully enjoy life.
Using your check for necessities implies you’ll need to find other ways to make ends meet.
Save money if food and housing costs exceed Social Security income. If you can’t find work, try moving to a city where you can live well on Social Security.
Use Social Security Benefits To Pay For Healthcare
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After you’ve saved enough for your necessary costs, pay your medical bills. Consider the BLS’s estimate of $6,833 per year for seniors’ healthcare in the US.
If you spend close to this amount, keep the rest of your check for this item. Plan for rising healthcare costs that Social Security is unlikely to fund.
According to HealthView Insights’ 2019 Retirement Health Care Costs Report, the average 65-year-old couple could expect to pay $12,052 a year for Medicare Parts B and D, plus supplementary insurance.
This service’s cost increases with age. A 70-year-old pair spends $16,068 annually, a 75-year-old couple $21,706, and an 80-year-old couple $ 28,552.
Save the rest
After paying for necessities and medical care, the average retirement benefit is only a few hundred dollars. What should you do with spare cash?
President of Prosperity Financial Group Edwin Cruz urges his clients to save 10%-20% of their Social Security payments for the unexpected.
After that, save six to nine months’ worth of living expenses.
Using this method, you should save at least $1,825.91 every year for six to nine months of emergency savings.
If you’ve already used your Social Security benefits to cover other urgent expenses, you’ll need to find additional sources of income to build an emergency fund.
Remember To Claim For Your Kids
If you have dependent children, you can include them in your retirement, disability, or survivor application.
An eligible child can receive up to half of a parent’s full retirement or disability income and up to 75% of a deceased parent’s benefit.
A family’s Social Security benefits are limited by the maximum amount set for each benefit calculation.
A pre-existing disability or a full-time student in grades 12 and below is qualified. Even though it isn’t your Social Security income, this payment from the SSA may be a lifesaver for your family.
Expenses Your Social Security Benefits Probably
To guarantee that retirees have adequate money to meet all of their demands, they must plan their retirement finances carefully.
For example, food, healthcare, and retirement savings may not be covered by Social Security. This is vital to remember if and when benefits are cut in the future.
You will still owe taxes after you retire. Taxation on Social Security benefits may be needed, making retirement costs more difficult to finance.
You’ll also need to consider travel costs and planned holidays.
While Social Security may not cover all of your retirement expenses, you can still save money and earn income. This increases your chances of retiring comfortably.