Here are the strategies millions of people who will soon be retiring have planned to use to deal with the loss of their savings or inability to save money.
Editor’s note: This post is part of Next Avenue’s “Retirement for the Rest of Us” series.
Allen R. Smith says that he never planned to retire. With degrees in exercise physiology, he worked as a ski instructor in Colorado for ten years and was involved in the wellness sector. He intended to transition into a second career as an author and columnist as he approached retirement age.
“I made a vow years ago to never be in this situation,” Smith, an Oceanside, California resident, says. “I wanted to work until the day I quit.” What I wasnt prepared for was reality. During the 2008 financial crisis, I lost my house, depleted my 401(k), and almost all of my savings. “.
“I wanted to work until the day I quit.” What I wasnt prepared for was reality. “.
He goes on, “COVID-19 hit, and it has been difficult to find the type of work I enjoy since then.” I am mostly dependent on Social Security benefits to support a modest lifestyle, though not always voluntarily. “.
Smith is just one of the 51 million or so Americans who are 65 or older and receive monthly benefits from Social Security. According to the Social Security Administration, a percentage of those beneficiaries rely on Social Security for 90% or more of their income.
Many recipients have “more month at the end of the money,” meaning they have to defer or only pay a portion of their bills. Madelaine LEsperance, an assistant professor at the University of Alabama, found in a recent study that when days go by since the last check, financial difficulties get worse.
Social Security benefits are distributed based on each recipient’s birthdate: benefits are paid on the second Wednesday of each month to those born in the first ten days of the month, third Wednesday of each month to those born in the second ten days, and fourth Wednesday to the remaining beneficiaries.
When a retiree’s benefits arrive on or around the due date of their rent or mortgage, they are likely to use it to cover housing costs. If their benefit is received earlier in the month, they might not have enough money when their rent or mortgage is due because they will probably spend it on food, utilities, and other expenses.
Teresa Johnson, 63, intends to live off of Social Security benefits in the near future. She moved her retirement funds from a 401(k) to a traditional savings account recently so she could easily access funds in an emergency. The transferred savings were subject to income tax, but it was well worth it for her peace of mind.
It helped me get over my fear of what would happen if I didn’t have any freelance work. Fortunately, that has never happened,” Johnson says. “I also understood that by the time I reach my full retirement age of 66 years and 10 months, my house would be paid off if I just made the regular payments.” “.
Johnson describes herself as “naturally frugal” and resides in a modest 900-square-foot home in Kansas City, Missouri. Her retirement strategy calls for cutting costs by paying off her auto loan, signing up for Medicare, and not taking on any credit card debt.
“My intention is to subsist on $2,400 in monthly Social Security benefits,” she states. “The Midwest, where I reside, is significantly less expensive than other parts of the country. Additionally, I’m increasing my emergency fund, which currently only has about $1,000 in it. In 2022, I experienced a few financial crises, which included ER visit expenses, a $1,000 veterinary bill, and roughly $5,000 in home repairs. “.
According to Chuck Czajka, the founder of Macro Money Concepts in Stuart, Florida, and owner of the Certified in Social Security Claiming Strategies (CSSCS) credential, Johnson can increase her benefits by optimizing her income prior to filing for Social Security.
Czajka continues, “Your top 35 years of earnings are used to calculate Social Security benefits, which are then adjusted for inflation.” “However, you can maximize by delaying. The longer you wait until after you reach retirement age, the higher your benefits will be (8%). This can be done until you reach age 70. “.
Recipients may work part-time after receiving Social Security benefits, but earned income limits may apply based on the recipient’s age or the amount of additional income they receive.
Johnson says she plans to continue freelancing after retirement. She currently earns an additional $500 to $1,000 per month by pet-sitting through a nationwide service. “I’ll keep pet sitting for as long as I can,” she declares. Advertisement.
In spite of their lack of savings and reliance on Social Security, older adults can still successfully navigate retirement, according to a recent Edward Jones study:
Smith claims that in order to save money, he looks up local senior discounts. “I take advantage of savings on food, cell phone service, utilities, internet, and more even though California is an expensive place to live,” he says. “My entire medical care is covered by the Veterans Administration.” Its tough, but I am making it. “.
BenefitsCheckUp, an online tool provided by the National Council on Aging, helps senior citizens find out what benefits, such as those for housing, utilities, and transportation, they might be eligible for.
Johnson declares, “I’ll enroll in Medicare and can afford the affordable Medigap or Medicare Advantage plans.” “I’ll also need to budget for property taxes and homeowners insurance.” “.
“I don’t need to have every luxury when I retire because I’ve always lived within my means,” she continues. “I live in a lovely neighborhood with a cute house, and I have wonderful friends.” Thats whats important to me. “.
Social Security plays a vital role in the lives of millions of American seniors, providing a reliable source of income in retirement. But with the changing landscape of retirement savings and pension plans, many wonder what percentage of seniors rely solely on Social Security for their financial needs.
The answer, according to a 2017 Social Security Bulletin article, is 40.2%. This means that nearly half of all older Americans depend exclusively on Social Security benefits to cover their living expenses in retirement.
This statistic highlights the critical importance of Social Security for a significant portion of the senior population. Without this income source, many retirees would face financial hardship and struggle to maintain their standard of living.
Understanding the Data
The 40.2% figure comes from an analysis of data from the 2015 Current Population Survey (CPS), which provides detailed information on the income and demographics of the U.S. population. The survey includes questions about income sources, including Social Security benefits, pensions, earnings, and assets.
The analysis focused on individuals aged 65 or older and examined the percentage who reported receiving income only from Social Security. This means that they did not report any income from other sources, such as pensions, earnings, or investments.
Factors Influencing Reliance on Social Security
Several factors contribute to the high percentage of seniors who rely solely on Social Security:
- Changes in pension offerings: Traditional defined benefit (DB) pensions, which provided a guaranteed income stream in retirement, have been replaced by defined contribution (DC) plans, such as 401(k)s and IRAs. These plans require individuals to save and invest their own money, leading to greater variability in retirement income.
- Societal changes: Increased labor force participation among women and older workers has led to higher earnings and greater reliance on earned income in retirement. However, for some individuals, lower earnings or job instability may result in insufficient retirement savings.
- Programmatic changes: Social Security program changes, such as increased retirement ages and reduced benefits for early retirees, have impacted the level of benefits received by some individuals.
Implications for Policymakers
The high percentage of seniors relying solely on Social Security raises concerns about their financial security and the adequacy of their retirement income. Policymakers face the challenge of ensuring that Social Security remains a sustainable source of income for future generations while also exploring ways to encourage and support retirement savings among working Americans.
Social Security plays a crucial role in the lives of millions of American seniors, providing a vital source of income for nearly half of the older population. Understanding the factors influencing reliance on Social Security is essential for policymakers to address the challenges of ensuring financial security for future generations of retirees.
The National Council on Aging offers an online tool, BenefitsCheckUp, to help older adults learn about benefits they may qualify to receive, including food, utilities and transportation.
Teresa Johnson, 63, intends to live off of Social Security benefits in the near future. She moved her retirement funds from a 401(k) to a traditional savings account recently so she could easily access funds in an emergency. The transferred savings were subject to income tax, but it was well worth it for her peace of mind.
Johnson says she plans to continue freelancing after retirement. She currently earns an additional $500 to $1,000 per month by pet-sitting through a nationwide service. “I’ll keep pet sitting for as long as I can,” she declares. Advertisement.
Allen R. Smith says that he never planned to retire. With degrees in exercise physiology, he worked as a ski instructor in Colorado for ten years and was involved in the wellness sector. He intended to transition into a second career as an author and columnist as he approached retirement age.
Here are the strategies millions of people who will soon be retiring have planned to use to deal with the loss of their savings or inability to save money.
However, is the NIRS report accurate in stating that 4 out of 10 retirees genuinely only receive Social Security income?
However, it is still reasonable to conclude that NIRS’s assertion that “A majority of older Americans, 40 2 percent, only collect Social Security benefits in retirement” is untrue. According to government agencies’ analysis, only roughly half of that amount is received by people, even though social security accounts for 90% of their income.
And yet, a 2017 study by researchers at the Social Security Administration, also using the SIPP, found that only 19.6% of Americans 65 and over received at least 90% of their total incomes from Social Security. That’s less than half the share of retirees than NIRS claims and SSA measures dependence using a lower bar – 90% of total income rather than NIRS’s 100%. Clearly, there’s a conflict. And, from a policy perspective, one-fifth of retirees being heavily dependent on Social Security’s isn’t a huge problem: the poorest fifth of workers are indeed quite poor, and Social Security was designed to provide a retirement benefit for workers who can’t easily save on their own.
Moreover, a second 2017 study, from two Census Bureau economists, analyzed retirement incomes using IRS tax records, which are more accurate than households’ responses to a survey. The Census Bureau study found that only 12% of Americans aged 65+ received 90% or more of their income from Social Security. Again, it’s not clear how that is compatible with NIRS’s claim that over 40% of retirees receive all their income from Social Security.
The%20Census%20Bureau%20study%20shows%20that%20even%20if%20you%20combine%20Social%20Security%20benefits%20with%20Supplemental%20Security%20Income%20(SSI),%20a%20means-tested%20welfare%20benefit%20paid%20to%20very%20low-income%20retirees,%20retiree%20households%20in%20the%20bottom%2040%%20of%20the%20income%20distribution%20%E2%80%93%20the%20ones%20the%20NIRS%20report%20would%20have%20you%20think%20are%20receiving%20pretty%20much%20all%20of%20their%20incomes%20from%20Social%20Security%20%E2%80%93%20received%20only%2079%%20of%20their%20total%20incomes%20in%20combined%20Social%20Security%20and%20SSI%20benefits Dependency on Social Security/SSI decreases even more as we go up the income distribution, while reliance on other sources of income rises.
Life on Social Security & Retirement – I Live Like a Queen Now But…
FAQ
How many seniors live off Social Security?
Can you survive on Social Security alone?
What percentage of Americans take Social Security at full retirement age?
What is the average Social Security check at age 65?
What percentage of seniors rely on social security?
According to the latest data from the Social Security Administration, more than 50% of seniors age 65 and above rely on Social Security for more than half of their monthly income. If you’re approaching retirement and intend to rely solely on social security benefits, you must have a strategy in place. Who Depends Mostly On Social Security?
What percentage of retirees rely on social security?
Based on a Gallup poll conducted in 2022, 55% of retirees rely on Social Security as a major source of income, compared to 33% of near-retirees who expect Social Security to be their major source of income after retiring. Some people plan to work until retirement, which can help them enjoy a more comfortable lifestyle.
Do seniors really need social security?
Armed with her degree in Nursing from the University of Missouri, Elizabeth ensures that all the site’s content is relevant to seniors today. In a survey conducted in 2022, 55% of retirees rely heavily on Social Security, but not many seniors can live entirely on that income.
Do older Americans only receive Social Security in retirement?
Americans are concerned and even afraid for their retirement security. And the news headlines often don’t make them feel better. The latest is a claim from the National institute for Retirement Security that “A plurality of older Americans, 40.2 percent, only receive income from Social Security in retirement.” If true that’s very worrying.