How to Prepare for retirement - Tips for Seniors
According to a recent survey by the Associated Press and the NORC Center for Public Affairs Research, one-third of Americans over age 50 believe they will outlive their savings. It’s no surprise that older Americans with lower incomes are the most anxious about retirement. In fact, most respondents with incomes below $50,000 believe they will be forced to rely heavily on Social Security benefits.
The survey found that about 43% of respondents plan on receiving Social Security benefits before their full retirement age or have already done so, consequently, reducing the amount they receive in Social Security benefits. The Social Security Administration states that monthly retirement benefits will be higher for those who delay starting those benefits – but lower if you do not delay. For example, consider someone whose full retirement age is 66 and his or her monthly benefit starting at that age is $1,000. If that person decides to begin receiving benefits at age 62, they’ll reduce their monthly benefit by 25% to $750. This happens to account for the longer time they will be receiving those benefits, and that decrease in benefits is usually permanent (more information can be found here).
Considering the fact that many seniors have trouble getting by in their near-retirement years, they’re also faced with the critical decision of collecting benefits early and thus reducing the amount received in Social Security benefits. The number of early claims means it is no surprise that many seniors expect to outlive any savings and start relying on Social Security benefits earlier.
Since, a typical Social Security retirement payment is not enough to keep someone above the poverty level in the San Francisco Bay Area, additional income will most likely be needed in order to be financially comfortable. The obvious choice is to start saving early and make intelligent investments, but that’s not always a realistic option for working-class people reaching retirement age. In some situations, it is possible to live on Social Security benefits, but making calculated lifestyle choices is key. Here are a couple of tips that will help:
Work part-time. The good news is that you can receive Social Security benefits and work at the same time. Being employed while claiming Social Security doesn’t pose any complications for those who have reached retirement age. However, if you earn an income while collecting Social Security benefits before the retirement age, a part or all of your Social Security payments could be temporarily withheld if you earn more than $16,920 annually (more info here). A part-time job is an increasingly common way of generating extra income when faced with hard times during retirement.
Don’t live alone. If you’re married, this will increase your total household income. If you’re not, consider getting a roommate(s) so you can share expenses such as rent, utilities, transportation, food, among other things. Live like The Golden Girls – the 80s TV show which revolved around four older, single women sharing a home and expenses. Not only is this living arrangement financially beneficial, but it’s also one that provides companionship and friendship. It will also help prevent issues relating to isolation and loneliness, which is a serious epidemic facing many seniors today.
If you’re a senior who’s still employed but beginning to feel anxious about retirement, remember that it’s never too late to cut back on expenses, put more into savings, and plan ahead so you don’t have to rely on Social Security benefits. With careful planning and taking proactive action before retirement, you’ll be able to reduce some of that financial anxiety and stress.
Gary Campanella is On Lok's Chief Financial Officer.
