Even if you haven’t saved enough for retirement, you can still count on Social Security. If you’re smart about it and a little lucky, your small retirement savings can supplement your Social Security payments. Here are five strategies for making it work.
Work as Long as You Can
If you’re still working, continue doing so as long as you can. Delaying retirement can increase your Social Security payments. It also gives you more money to put toward retirement. Even if you know you can’t save enough, saving something is better than saving nothing at all. Keep working. If you’ve already retired, consider part-time work or a consulting job. More income means less worry, particularly if you reach a point where your health makes working impossible.
Use Your Home as an Asset
If you own your own home, now is the time to consider how best to use it as an asset. Selling your home and moving to a smaller place can give you a lot of cash to invest for the future. If you have a beloved friend, try pooling resources as roommates. Or if you’re married, downgrade to a small apartment.
If you’re not ready to part with your home, there’s at least one workable alternative: seniors over the age of 62 who live in their own homes are eligible for a reverse mortgage. This loan taps into home equity to offer you cash you don’t have to repay—as long as you stay in your home and comply with the terms of the loan. That’s money you can invest, or use toward monthly expenses. Talk to a financial advisor about whether a reverse mortgage or a home sale is the best option for you.
Get Out of Debt
Paying down debt can seem impossible on a meager income. But the interest rate of your debt almost certainly exceeds that of any savings you have. So pay down debt now, as quickly as you can. This presents it from acting as rock around your neck in retirement. If you’re already retired, contact your lenders about settling your debt, lowering interest, or consolidating into one loan. Then pay what you can as quickly as you can.
If you have a mountain of debt and no savings, you may need to seriously consider filing for bankruptcy. Talk to a lawyer and a financial advisor about how this might impact your retirement options.
Live as Frugally as Possible
It seems obvious that you need to live frugally. But what does that really mean? When you’re worried about finances, a dollar here or a dollar there might seem trivial. Yet they add up over time. Saving just a dollar each day on your expenses means more money to pay your bills. Some simple ways to live more frugally include:
- Entertaining at home rather than eating out
- Buying store brands and generic products
- Comparison shopping online, where things are often cheaper
- Asking your doctor to prescribe generic drugs
- Scaling back on cable television and using streaming instead
- Switching banks if your bank charges you monthly usage fees
Move to a Tax-Friendly State
Every dollar helps. Some states tax Social Security, which can drain your meager monthly income. Other states have high sales and other taxes that can make frugal living more difficult. Tax-friendly states for seniors include Georgia, Arizona, and Florida. Move to one of these states and you can hang on to more of your money.
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