Living on Social Security Alone: 12 Steps to Financial Stability (2024)

Enjoying your retirement years while financially relying on Social Security benefits as your primary source of income is achievable. It requires planning ahead and a bit of strategizing to optimize your budget and minimize your expenses. A variety of factors, ranging from insurance to housing to transportation and beyond, require careful scrutiny.

A life supported solely by Social Security may come with challenges and won’t leave room for extravagance. But for those who need to make this situation work, there are some key steps to consider for living on limited retirement income. Here are 12 methods that can help make it easier.

We surveyed over 1,000 Americans and discovered that 35% plan to retire between the ages of 60-65. Although you can file for Social Security once you reach 62 years of age — known as early retirement — full retirement is achieved between 66-67 years old, depending on your birth year. Choosing to retire early can severely impact your Social Security payouts.

To maximize your retirement income, it’s important to wait until you reach full retirement age to claim your Social Security benefits. Doing so will allow you to receive 100% of your benefits, thus maximizing your monthly payout.

If you’ve already filed for Social Security but wish you had waited longer in order to increase your benefits, it may not be too late for you to reverse your decision. When you first apply, you have a 12-month window to withdraw your application. The caveat is that you must repay — without interest — any benefits you have received up to that point. This option then allows your Social Security benefits to continue increasing until you choose to file again.

For those who are beyond the 12-month window since applying for benefits, you still have an opportunity to grow your benefit amount. Once you reach full retirement age, you can pause your current benefits indefinitely. You will not be required to repay the money you’ve already received. For each year your benefits remain suspended, up until the age of 70, your retirement benefits will continue to grow.

It’s important to think about the cost of living and the housing costs associated with where you currently live. Calculating the cost of senior housing in your area will show you the realities of financially sustaining these living expenses. Figuring out where your limited income will stretch the furthest can help you identify the best state for retirees.

A move to a more temperate climate may also ease your financial burden, with lower heating and cooling utility costs to manage throughout the year.

Eliminating high-interest debt, such as credit cards, before you leave the workforce means fewer monthly costs to cover during your retirement. If you can’t pay off credit card debt completely prior to retiring, reducing the balance as much as possible in advance will still help lower your expenses.

Ideally, you will successfully pay off your mortgage before you retire. But if that’s not feasible, do not deplete your personal savings in order to pay it off ahead of your retirement. Just remember to factor those existing mortgage payments into your budget during your retirement planning.

When asked what they anticipate using as their primary financial source for their retirement, survey respondents favored one of two options. Thirty-five percent indicated that they would rely on Social Security payments, while another 35% noted that their 401(k) would serve as their primary retirement funding source. Only 3% of Americans plan to rely on annuities, which offer another option for a guaranteed income stream.

The survey also revealed 52% of older adults age 60 and over are more likely to see Social Security as their primary retirement funding. Comparatively, 42% of adults ages 45-60 feel the same way, but only 24% of those 30-44 and 21% of people 18-29 agree.

Gen X adults were far more likely to lean toward the 401(k) as their main retirement financial support. Forty-one percent of respondents ages 30-44 plan to use their 401(k), compared to only 20% of adults over 60 who plan to do the same.

Resources for Low-Income Seniors

Four out of five people surveyed are concerned about the effect current inflation may have on their Social Security benefits. Survey responses indicated that 42% are very worried, 27% are somewhat worried and 11% are slightly worried. Female respondents are the most anxious about inflation’s impact, with 46% of women feeling very worried. In comparison, 39% of men held the same fears.

Some people are unaware that Social Security incorporates cost of living adjustments (COLA) as a method of keeping payments in line with current inflation. But these COLA increases have not kept up with rising inflation rates. In late 2022, the Social Security Administration announced an 8.7% COLA to take effect in January 2023 in an effort to counteract the 9.1% inflation peak reached in 2022.

According to the Social Security Administration, the average monthly Social Security benefit is $1,691.53. When surveyed, 20% of Americans seriously underestimated the average monthly payout as being under $1,000, and 15% of people simply had no idea what that monthly total could be.

The confusion experienced by these Americans is understandable considering how the SSA calculates Social Security benefits. The formula they use is based in part on a person’s lifetime earnings and multiple indexes that account for changes in average wages over the years since earnings were received. Thankfully, the average retiree does not need to worry about that complicated math and only needs to focus on the Social Security benefits that apply to them.

In order to make living on Social Security alone a reality, it’s important to examine your entire financial situation so you can make adjustments to maintain a good quality of life on a tight budget. Learning how to maximize your Social Security benefits is the key to thriving during your retirement.

Christian Simmons is a writer for RetireGuide and a member of the Association for Financial Counseling & Planning Education (AFCPE®). He covers Medicare and important retirement topics for RetireGuide. His unique blend of business and writing backgrounds has equipped him to understand complex retirement topics and convey that information in an informed and easily digestible way.