For millions of seniors, the coronavirus economy has prompted forced early retirement due to layoffs. For others, stock market volatility has ruined retirement accounts, leaving little supplementary savings for retirement.
Those who find themselves in these troubling situations may need to rely solely on Social Security benefits for income. This is far from ideal since the average benefit provides just over $18,000 in annual income.
Bu if you have no other option, here are five things you can do to help ensure you have the income you need throughout your later years.
1. Choose a less costly place to live
The amount of money seniors need to cover the necessities varies dramatically from one part of the country to another.
If you're making do on Social Security alone, choosing a region with a low cost of living can make all the difference. In Alabama, for example, the bill for necessities comes in at around $21,500 a year, while in Washington, D.C., the same basic costs would require about $33,000.
If you don't already live in a low-cost state, relocating to one ASAP could help you avoid debt, preserve whatever savings you have, and make sure your needs are met.
2. Pay attention to state tax rules for benefits
Most states don't tax Social Security benefits, but 13 currently do for at least some retirees.
While you usually have to make a pretty high income to be taxed on your benefits, rules vary by state. If you live somewhere that you're subject to tax on Social Security income, consider relocating to one of the majority of states where this isn't a problem.
3. Use a strict budget
When you're living on Social Security alone, you have to use your money wisely. Budgeting ensures your limited cash goes to cover the essentials and that you're using any extra on things you value most. A detailed budget that accounts for each dollar is essential.
4. Shop carefully for Medicare supplementary coverage
For many seniors with health issues, co-pays and co-insurance costs are prohibitively expensive. Instead, you may want to shop for a Medigap or Medicare Advantage plan that offers more-comprehensive protection and better fits your needs. Although you'll have to pay premiums, it could save you in the end if you find the right policy.
5. Try to build a small emergency fund
When trying to get by on Social Security, any unexpected expense could cause your carefully constructed budget to fall apart.
To avoid serious financial trouble when surprise costs crop up, aim to save up at least a few thousand dollars for emergencies. Your coronavirus stimulus check could be a good way to start building this cash cushion if you need one.
While having savings to supplement Social Security is ideal, if you're smart about where you live and how you spend your money, your retirement benefits could be stretched enough to provide what you need.