Plan What You Will Do with Your Social Security Check
- Author: William Asher
- Posted: 2024-03-14
According to the Bureau Of Labor Statistics 2015 Customer Expenditure Survey, most adults who are 65 years and older spend around $45,000 each year. This money is spent on housing, food, healthcare, transportation, and other costs. However, most individuals who receive a monthly Social Security check only get about $16,380 annually, which comes out to about $,1360 a month. Those who plan to live solely on their Social Security check may quickly find that this is not enough to live the retirement they dreamed of.
Budgeting and careful planning are important when it comes to spending money wisely. No matter what your Social Security check or supplemented income will be, you don't want to just blow through it.
Set up a Monthly Budget
According to Kimberly Foss, who is a certified financial planner and founder of Empryion Wealth Management, the first thing retirees need to do is make sure they are receiving the right amount from their Social Security check. The next step is to budget the money.
Here are a couple of simple ways that retirees can budget their money, according to Bill Kearney, who is the owner of Integrated Financial Concepts.
1. Look at your expected expenses. This will include housing expenses, healthcare, food, debt, and all other living expenses.
2. Make a total of your income, from all sources.
3. Then look at how your expenses compare with your expected income sources. Basically, you want to see what your Social Security payment will cover.
Prioritize the Basics
You need to allocate the money you will spend. You want to treat your Social Security check as you would a normal paycheck. Use the money to pay for expenses that regularly occur, like housing and food. A BLS survey shows about how much adults who are 65 and older spend on their basic needs each month. The average is $15,529 on housing, $3,624 on utilities, and $5,506 on food.
Try to put about 65 percent of your Social Security benefits aside for housing and food costs. If the benefits that you receive equal what is comparable to the national average, it is unlikely that 65 percent will actually cover those costs.
Still, you want to dedicate as much as you can to your basic needs, which is housing and food. If you do not, you will not be able to live comfortably. Something to keep in mind is that after you have covered these basic expenses, you are going to need to use some other form of additional income to cover your other costs. If you do not have other source of income, you want to find ways to cut back on major expenses. For example, moving to a less expensive city may be a good option.
Cover Healthcare Expenses
Based on BLS data, most adults who are 65 years and older spend about $5,765 a year on healthcare. If this is true in your case, it would be a good idea to dedicate the rest of your Social Security benefits to the cost of healthcare. Keep in mind that healthcare costs will likely continue to rise.
HealthView Insights reported in 2016 that the average retired 65-year-old couple spends about $7,700 each year on Medicaid for parts D and B, plus supplemental insurance. A couple who is 70 years old is likely to spend about $10,600.
Put the Rest in Savings
If you plan your budget according to the national average discussed above, you are likely to be left with about $800 in Social Security benefits. It is a good idea to put this money in savings.
It is estimated that 69 percent of Americans do not even have $1,000 in savings, according to GOBankingRates. And when it comes to seniors, they have no savings. Just one financial difficulty, like a car repair or injury, could completely wreck your financial life if you have little to no savings. So you want to build an emergency fund.
According to the owner of Prosperity Financial Group, Edwin Cruz, individuals should put aside about 10 or 20 percent of their Social Security check for an emergency. It is good to do this until the person has at least six months worth of savings built up.
Consider Other Expenses That Will Arise
Other expenses are likely to arise that your Social Security check will not cover. For example, some individuals may have to pay taxes in their retirement years. Or you may want to go on vacation. It is unlikely that Social Security will be enough to cover every one of your costs during retirement. However, with a budget and planning, you can find ways to generate more income and lower your expenses. This will help you to have a comfortable retirement.