What can you do when you won't make it on Social Security alone?
Closing in on Retirement with Very Little Savings
by Dollar Stretcher Contributors
Baby Boomers Changing Insurance Needs
Getting Rid of Stuff When You Move to a Smaller House
Will You Be Ready for Retirement? A Checklist
Closing in on Retirement with Very Little Savings
Are there any other Dollar Stretchers closing in on retirement with little or no retirement savings? We are in this situation and I do not think we can make it on Social Security alone. What are your plans to support yourself during retirement? Will you continue to work in some way? This is a very stressful time in our lives, and I admit I'm scared. I would really like to hear from others in the same situation. Thanks!
Slash Your Budget Ruthlessly
I found myself in this situation when I had to retire early for medical reasons. I lived solely on my Social Security for over 20 years.
First, identify the little things you can do without, such as gourmet coffee at fancy shops, frequent eating out, and pre-cooked food. These add up fast.
If you are paying someone else to cut your lawn, clean your house, wash your car or do other chores, determine which ones you can do yourself.
Buy your clothing from the clearance racks. Just this week, I bought two brand new tank tops for only $2 each. This is cheaper than consignment shops.
Check whether you are eligible for any state or federal benefits, such as SNAP, low-income Social Security benefits which pay for Medicare premiums, and more. These will put money back into the budget for other things. Benefitscheckup.org will help you find these and other programs.
Slash your budget ruthlessly. You can always add back on later.
Consider whether you can work part-time to bolster your budget. You can even start your own small business offering services such as dog- or baby-sitting, dog walking, cat sitting, or sewing.
Make Prepping for Your Retirement Your Hobby
Make it something you do often and with pleasure. It is so much less stressful if you use this mindset. Otherwise, it gets too overwhelming.
Concentrate on paying off all debt using your regular income by making strong cuts to spending. Sell anything you don't actually use. Learn to love and appreciate what you already have. This is also the very best time to practice learning to live on less than what you will bring in once you can no longer work. Even in retirement, you must continue to save for emergencies like car repairs, house repairs, etc. It can be done. Read Early Retirement Extreme and rethink your priorities.
I found taking an extra job a worthwhile endeavor. I worked a second job off and on for over ten years as a seasonal weekend employee at the IRS during tax season. It wasn't a lot of money, but it completely changed my financial future. Don't spend the extra income! Immediately send the entire paycheck into an individual Roth IRA and pretend it is not there. It doesn't belong to you. Instead, it belongs to the future you.
Retrain anyone who depends on you to bail them out of financial problems. They need to take on an extra job themselves and learn to handle their money. Learn to say "NO" to yourself and others without guilt. Leave your Roth alone. Don't look at your account balances every day. It will only create anxiety.
One of my co-workers, who attends expensive investing workshops a couple of times a year and moves her money around every few weeks, was very happy to tell me she had only "lost $54" this past year because of her daily strategies. I didn't move my money and it grew $6K. No one can time the market.
Vanguard, Putnam, Schwab, and Fidelity are all reputable companies where you can open an online individual Roth IRA if you do not already have one. Try to max your contributions to your Roth every year, because that money will not be taxed again, no matter how much it grows. If you have more money you can put aside, become familiar with the catch-up rules and make deposits into a traditional individual IRA or through your employer. I suggest using a target date mutual fund that is named by the year you want to retire. These are very well managed for a very low fee. Personally, because I was/am willing to take the risk (and there is always a risk), I picked a target date fund 20 years farther out from my actual retirement date, because more money will be invested in stocks. You will be fine as long as you make a plan and take action on it. Make it your priority. Every step you take will help safeguard your future.
Find a Flexible Part-Time Position
We are in the same situation except my husband is disabled (had a stroke six years ago) and I had to take early retirement to make ends meet. I drive school bus and/or a school van for two hours in the morning and two hours in the afternoon. This way, I can be home more and still get extra money. Being a school bus driver or van driver is a great part-time job for retired folks (and anyone looking for a few hours work). It pays very well and you still get to be home more.
Donna from PA
Do a Practice Run
Before you retire, I would suggest that you try to live on what you will be getting for Social Security for at least six months to a year. I am retired now and wish I had done that. Since I retired, however, I am no longer on medication at all. Apparently, my job and the commute to my job were causing my blood pressure to skyrocket, so that's one bonus. I no longer have to pay for pills.
What's Your "Plan B"?
If you have minimal savings or none at all, you are not ready to retire. Social Security is generally not enough for a comfortable retirement. You will need to continue working until you have a nest egg. Also, you need a plan going into retirement. Start by setting up a budget using the amount of money you will have coming in with Social Security. (You can get this information on your Social Security benefits on the SSS.gov website.) Don't forget the emergency expenses like car repairs, home maintenance/replacement (if you are a homeowner), and medical expenses. See if you can live on that budget prior to actual retirement.
If you can't, you need a "Plan B," which will include continuing working whether part time or full time. If you own your own home, think about downsizing and put that extra money in your retirement account. Explore possibilities of having extra income following retirement with something you love to do. The possibilities can be endless. Babysitting, dog walking, housesitting, working at election polls, and part-time caregiving are all possibilities. If you have a nice car and are in an urban area, Uber driving can boost your income. The main thing is to have some savings for when you can no longer work and to have a plan and budget in place. There are many websites that have retirement planning information. AARP is one, and you do not have to be a member to use the website. Good luck and enjoy retirement when the time comes!
It's Possible to Retire with Little Savings
There are ways to retire with little savings. They all boil down to drastically reducing your expenditures and depend on what kind of assets you've built up besides retirement savings. Things that can be done are:
- Your house could very well be an asset. If you own one, moving can help fund retirement in multiple ways. First, you can get money that's being stored up in your house out. Second, you can decrease your cost of living when moving. Within a metro area, you can move to a cheaper neighborhood with smaller houses and school system that's not as good. Make sure a new house is compact and one level and will be easy to maintain and to navigate as you age. If you don't feel particularly tied to your area, you might also look at moving across country or south of the border. The southeast generally has a lower cost of living than the east and west coasts do. Much of South and Central America have significantly lower cost of living. Numbeo.com has an interesting city to city cost of living calculator.)
- A car is another big expense that could be cut. Once you're not working, does your household really need two cars? Maybe not.
- Your friends and family can also be an asset. While moving, you might consider combining households with either fellow retirees on a budget or moving in with an adult child. My grandmother spent the last five or six years of her life rotating between her living children's homes. If you're only just approaching retirement, you probably have more than five or six years left, but something along these lines might work for you.
- Your talents and interests can be assets as well. Just because you're retiring doesn't mean that you can't work at all. Instead, try taking on small side projects. Watch the neighbor's kids after school. Tutor. Garden. Become an Uber driver. You can get paid to do things you enjoy doing anyway.
Work Doesn't Have to Be Stressful
My husband and I picked up part-time jobs as Customer Service Representatives at a local non-profit museum. We only work three days a week for seven hours each day. It only pays minimum wage, but it is not stressful. We have a great work environment and the money helps augment our retirement income. We love it.
Don't Take Early Social Security
Since you don't mention your age, it's a little more difficult to give pointers. You mentioned Social Security, so I assume you are at least approaching 62, but don't take early Social Security. You gain about 8% per year by waiting until your full retirement age, and it goes even higher if you wait until 70.
Meanwhile pay off any debt that you have. People who retire in debt begin to have problems pretty quickly as their retirement income is not as high as working income.
If you are already debt free, develop a "retirement budget," using your known income in retirement. If you have excess money, put that in to build up some excess savings. Even retirees need rainy day funds. Your retirement budget might show you have a shortage and will guide you in knowing how much part-time work you must do to make ends meet.
To help save money on health care, find a supplement plan for your Medicare. When you speak with an insurance representative, ask about the G plan to save you some money. It is identical to the F plan, which pays all of the expense that Medicare does not with the exception that you must pay the Medicare deductible. In 2016, this is $166. Plan G may run $20-$25 less per month for an annual total of $240-$300, so you have covered that $166 and saved about $80-$140 per year.
As I mentioned earlier, a budget is a must. Get started with that today. And of course, use Dollar Stretcher to provide you with tips on saving money.
Have you started preparing for retirement?
Our pre-retirement checklist will walk you through the steps you need to take.
You've Got Work to Do
You have a lot of work to do. You must come up with a budget that will make it possible to live on Social Security alone. Yes, you will have to work as well. The work money will be a bonus for vacations and other expenditures. The bare bones of life must come from your monthly Social Security check. So, you must in some way downsize. Sell your home. Rent a room out. Move to a smaller apartment. Get an RV and move to an RV park.
Put your name on the list at all elder housing that is government subsidized. There is a waiting list. Consider moving in with a relative. Does a child or niece/nephew have a spot for a tiny house or RV? Do they have a garage or workshop that could be converted to a small apartment? Housing will be your biggest expense, and you must change now.
Check to see about food stamp eligibility when you go onto Social Security. Check to see if you are eligible for any senior discounts or subsidies on utilities. Look at your current home heating and cooling. Can you do without air conditioning? Maybe one room can be air conditioned. My mom was on a tight budget and she would turn the air conditioning in the living room on during the day and then shut it off at night. She'd then turn the bedroom air conditioning on with a timer that turned it off at 1am. She cut her bill by $90 that way. Can you switch to a wood stove for heat? Retirees have time to gather wood on nice walks in the fall. Consider candles for light at night in all but the main room. Sell the big refrigerator and get a small one.
But keep the freezer if you have a separate one. You will have time to shop more frequently and can store good sales.
Have a sale and get rid of all the baggage you have accumulated. Consider going down to one car (get rid of gas guzzlers) or no car if there is public transportation. You do not have to be anywhere at any specific time when you retire, so public transportation works well. Many people will give the elderly rides to the store or church, so ask. Start shopping at thrift stores for clothing, etc. Gifts can be bought at thrifts ahead of time. I actually give better gifts now that I have more time. I recently gave my son and his wife a set of table and chairs for the patio. She wanted red wrought iron and I found a set in black and painted it for $50 total. It looked better than the set that she had looked at for $400.
A huge possibility for making money is thrifting and repurposing toys and furniture. Sell them at garage sales periodically and make a profit. There are antique and thrift malls that rent booths. It is fun and good exercise to find treasures and sell them. Go visiting. Do you have friends and family that would like to see you? Go on extended visits if you feel welcome. This saves on utilities and keeps you from being too bored. Get involved in church or volunteer activities that cost little but keep you busy. My mom was a hospital volunteer. She got free lunch on days she volunteered and usually was able to bring home a to-go box for that night's dinner. Consider babysitting in someone's home. Free utilities and free food help with the budget, and you can charge a reasonable rate to help a young family out. Can you sew? Are you good at fixing things? Can you tutor? Do it for extra money.
Start cooking from scratch and make up your own mixes, condiments, and dressings. Use powdered milk whenever possible. Learn how to bake your own bread and make homemade noodles. Do you have a yard? Plant a vegetable garden and raise chickens for eggs. Plant fruit trees. Gather fruit from neighbors' and friends' trees that may just be falling on the ground. Take up canning. Go hunting and butcher and freeze the meat. Check with local butchers at the end of hunting season. They often have meat that was never paid for that they sell at big discounts. Go fishing frequently and eat the fish you catch. See about getting Meals on Wheels for a once-a-day big meal and then do soup and sandwich for the other.
Consider going down to just one cell phone. Try doing without WiFi or cable. You can find free WiFi and you can go to the local library for books and movies. Maybe a neighbor or friend will let you come over for your favorite show.
Take a look at your insurance expenses and cut what you can do without. File for home exemption. File for any elderly tax exemptions.
The one thing I know is can do this and have fun, too.
Van in AL
Don't Miss This Recommended Reading
I recommend reading the book How to Retire the Cheapskate Way: The Ultimate Cheapskate's Guide to a Better, Earlier, Happier Retirement.
Valerie in Oklahoma
Take the Next Step:
Have an idea that we didn't include? Send it to us and we'll add it to the article.
Baby Boomer Tools & Resources
- A tool to determine the best time to take Social Security benefits
- Get out of debt before you retire
- Get free answers to financial questions
- Get free answers to legal questions
- Retirement shortfall calculator
- Life expectancy calculator
- IRA required minimum distribution calculator
- More retirement planning calculators
Trending in Baby Boomers
- Investing retirement money that you may never need
- Financial tips when nearing retirement
- Why pay off your mortgage with a reverse mortgage loan?
- 3 ways retirees can tap into their home equity
- Using credit cards in retirement
- Could an underfunded government pension put your retirement at risk?
- Get onboard with affordable train travel
- This week's Readers' Tips