10 Tips to Live Well on Social Security Alone

Social Security is a game-changer for American workers. Created in 1935, it does more to lift people out of poverty than any other program in the country, according to the nonpartisan Center on Budget and Policy Priorities. Their analysis of 2022 data finds that Social Security payments keep 21.7 million people out of poverty, 15.4 million of whom are age 65 or older.

Still, the program was never intended to replace all of a retiree’s income, and trying to live off Social Security payments alone is a tall order.

“Frankly, it’s a little concerning,” says Antwone Harris, chief planning strategist at Platinum Bridge Wealth Strategies in Washington D.C. “It’s not something I would advise.”

However, the reality is that some older Americans will spend their golden years relying on Social Security payments to make ends meet. If you’ll be one of them, here’s how to live well on a modest amount of money.

Living off Social Security alone will be more comfortable if you have fewer expenses. Whether you are still working or already retired, make eliminating debt a priority. Likewise, don’t be tempted to try to bridge any gaps in your retirement budget by using debt.

“You don’t want to use your credit cards,” says Krisstin Petersmarck, an investment advisor representative with Bridgeriver Advisors in Bloomfield Hills, Michigan. “You want to live within your means.”

Charging purchases to a credit card may seem like an easy way to pay for the things you want right now, but as interest charges add up, you’ll find it increasingly difficult to make ends meet financially.

If you expect to live on Social Security alone, it could be a mistake to file as soon as you are eligible at age 62.

“The most critical thing is when you start taking benefits,” says Stuart Chamberlin, founder and owner of Chamberlin Financial Inc. in Boca Raton, Florida. He recommends people wait to begin their benefits to maximize how much they receive each month.

Claiming benefits at age 62 means you could see your monthly payments reduced by as much as a third. On the other hand, for every year you wait to claim past your full retirement age, you’ll get an 8% boost in benefits, through age 70.

“Delaying it to age 70, from a planning standpoint, could be a huge benefit,” says Bill Van Sant, executive vice president and managing director with wealth management firm Girard.

Waiting until age 70 can be especially important for married spouses since they are able to coordinate benefits.

“The higher earning spouse should delay their benefit as long as possible,” Harris says. Not only will that boost monthly benefits for the couple, but it will also result in a larger payment for the surviving spouse.

When one spouse passes away, the surviving spouse is eligible for benefits that are equal to the higher of the two spouses’ benefit amounts.

Social Security payments aren’t immune from taxation, and that is one reason to carefully consider if and how much you work in retirement. Working during an early retirement can also impact your payment amount.

If you claim benefits before your full retirement age, the Social Security Administration limits how much you can earn before they start docking your benefits. In 2023, the government will deduct $1 for every $2 you earn above $21,240 if you are receiving benefits before your full retirement age. If you will reach your full retirement age in 2023, you can earn up to $56,520 before $1 is withheld for every $3 you earn above that amount.

Once you reach your full retirement age, there are no limits on how much you can earn, and the amount previously withheld will be used to adjust your Social Security payments upward. However, continuing to work could cause your benefits to become taxable.

The IRS determines if and how much a person’s Social Security benefits are taxable based on something called combined income. It is the total of your adjusted gross income, nontaxable interest and half your Social Security benefits. If you are a single taxpayer and your combined income exceeds $25,000, up to half your Social Security benefits may be taxable. If your combined income exceeds $34,000, up to 85% of the payments you receive may be taxable. For married couples filing jointly, those numbers are $32,000 and $44,000 respectively.

It is possible to live well on Social Security, according to Brian O’Connor, author of “The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese.” He knows this because he helped his father-in-law, who was living on Social Security alone.

“The big problem there was housing,” O’Connor says. To solve that problem, O’Connor and his wife purchased a fixer-upper condo for their parent to live in. That eliminated the largest retirement expense, and after his father-in-law moved to assisted living, the family was able to sell the condo for a profit.

That may not be a solution for everyone, but if you plan to live on Social Security alone, you may need to get creative about your housing situation. That may include downsizing, moving in with family or looking for a roommate. If you need to rent, look for a community that covers utilities or offers amenities such as free entertainment or transportation services.

Part of reducing your housing expenses may be moving to a new location where the cost of living is lower. That doesn’t necessarily mean moving across the state or country either.

According to Petersmarck, people should ask themselves: “If I moved 15 miles or 10 miles away, could I save a lot of money on my rent or mortgage?”

Rural areas may be significantly cheaper than urban centers. Just be sure that you won’t simply be trading one expense for another if you end up having higher transportation costs. Consider how far you’ll need to travel to stores, family and other frequent destinations.

Although it might not sound like financial advice, “having a solid exercise program is really important,” Harris says.

While most retirees have Medicare coverage, that won’t pay for all health care expenses later in life. There are still co-pays and deductibles plus some services, such as dental and vision care, aren’t covered by original Medicare.

A retired couple age 65 in 2023 can expect to pay $315,000 in health care costs over the course of their remaining lifetimes, according to Fidelity Investments. Although some medical costs may be impossible to avoid, staying as healthy as possible could reduce these expenses.

If Social Security is your only income, it may be necessary to cut spending down to the essentials. That may mean cooking at home rather than dining out or selecting free, local entertainment rather than tickets to a show.

Also, keep an eye on how fixed expenses, such as insurance premiums, increase from year to year. “When you have a $20, $30 (increase) here or there, it could be a big change,” Van Sant says. Instead of automatically paying for these increases, shop around to see whether a better deal is available.

Harris says many retirees fail to take advantage of assistance programs that may be available to them. Both government and community programs may be offered in your area, and they can reduce or eliminate some out-of-pocket costs.

For instance, low-income individuals may qualify for Medicaid which could cover bills not paid by Medicare. Dial-a-ride programs may offer low-cost transportation that will allow retirees to live without a car and its costly insurance payments. Senior subsidized housing is also available in some areas, an option that O’Connor’s mother-in-law used to save money.

Check with your local Area Agency on Aging to see what options are offered in your area. You can find your local agency using the federal Administration on Aging’s online Eldercare Locator.

Sometimes, there is only so much you can cut from your budget. In that case, consider how you can supplement that income.

Getting a part-time job may be one option, but that income could result in some of your Social Security becoming taxable. Meanwhile, selling off possessions you no longer need or use is a way to generate cash without triggering taxes.

Or if you own your home, a reverse mortgage can be another way to generate steady income that isn’t taxable. “By all means, do the reverse mortgage if you can,” Chamberlin says.

With reverse mortgages, also known as home equity conversion mortgages, those age 62 or older can use their home’s equity to receive a line of credit, monthly payments or a lump sum. It’s not free money, and fees and interest are assessed on payments. When the homeowner dies or moves out of the house, the home is typically sold to pay back the loan.

People should carefully consider the pros and cons of a reverse mortgage, and having to sell the home later might make for unhappy children or heirs. Still, it is worth considering if you are struggling to make ends meet on your Social Security alone.

According to Chamberlin, “What matters is that you have a roof over your head and money to live more comfortably.”