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Can You Live Off of Your Social Security Check?
Sep 14, 2021
We frequently remind our readers that Social Security was intended to be supplementary income in retirement. It was never meant to fully fund your lifestyle! And yet, some people never do establish retirement savings, and find themselves living entirely off of their Social Security checks. Is this possible? And what would that type of retirement look like?
The average monthly benefit is $1,523. That’s a pretty tight budget, if you fall somewhere around the average. Of course, your actual Social Security benefits might be higher or lower than the average. But it’s worth asking yourself: Can I live off of $1500 a month?
Retiring later can help.
Your full retirement age is either 66 or 67, depending upon when you were born. This is the age at which you can claim your full Social Security benefits. Avoid retiring earlier than this age, because your checks will be reduced (as much as 30 percent, if you retire at age 62). On the other hand, working until age 70 can boost your checks a little higher.
Can you relocate to an area with a lower cost of living?
In some areas of the country, living off of Social Security is inconceivable. But other areas do offer a much lower cost of living. Do your research, and don’t forget to factor taxes into the equation. But will a move mean leaving family and friends behind? How much will it cost to travel and visit them?
Are you single or married?
If you’re single, consider living with at least one roommate. You can split expenses, and retiring with friends can be fun!
If you’re married, the two of you should consider what will happen when one of you passes away. Widows and widowers can claim survivor’s benefits, which is the larger of the two Social Security checks… but you’ll lose one check regardless.
Are you debt free?
Living on a fixed income is difficult for anyone, but particularly hard for those carrying significant debts. If you can pay off your mortgage, credit cards, and other debts before you retire, you stand a better chance of living within a more restricted budget.
Consider your healthcare costs.
For many retirees, healthcare costs exceed even the cost of housing. Evaluate all of your Medicare options and choose an insurance plan or plans that will most benefit your financial situation.
The above points should give you an idea how you would live on Social Security alone. For most people, this plan is financially risky and does not provide for an adequate lifestyle. We strongly recommend that you contact us to discuss other options for funding your retirement, rather than counting on Social Security to cover everything.
Life insurance isn't one-size-fits-all. Just as your life evolves over time, so too should your insurance coverage. Whether you're starting your career, raising a family, or enjoying retirement, understanding how to tailor your life insurance policy to your current life stage is essential for ensuring adequate protection for you and your loved ones. Starting Out: Young Professionals As a young professional just starting out in your career, life insurance might not be at the top of your priority list. However, this is the ideal time to secure coverage, as premiums are typically lower when you're young and healthy. A term life insurance policy can provide affordable protection for your loved ones in the event of your untimely passing while also allowing flexibility to upgrade to permanent coverage later on. Growing Family: Parents and Homeowners For parents and homeowners, life insurance becomes even more crucial. You want to ensure your family is financially secure and able to maintain their standard of living if something were to happen to you. Consider a combination of term and permanent life insurance to cover immediate expenses, such as mortgage payments and childcare costs, as well as long-term financial needs like college tuition and inheritance planning. Midlife Milestones: Empty Nesters and Career Climbers As your children grow up and become financially independent, your insurance needs may shift. You might choose to adjust your coverage to reflect your changing financial obligations and goals. This could mean reducing coverage amounts or transitioning to a policy with cash value accumulation features, such as whole life insurance, to supplement retirement savings and leave a legacy for your heirs. Retirement: Golden Years and Legacy Planning In retirement, life insurance can still play a valuable role in your financial plan. While your need for income replacement may decrease, you may still want coverage to cover final expenses, estate taxes, or leave a financial legacy for your loved ones. An insurance policy with guaranteed death benefits, such as universal life insurance, can provide peace of mind and help protect your assets for future generations. Review and Adjust Regularly Regardless of your life stage, it's essential to review your life insurance coverage regularly to ensure it continues to meet your needs. Major life events, such as marriage, divorce, birth of a child, or career changes, may warrant updates to your policy. Working with a trusted life insurance broker can help you incorporate these changes into your long-term plans and make informed decisions about your coverage. Life insurance is a vital component of your financial plan at every stage of life. Meet with us now and regularly in the future so that we can help you evaluate and adjust your life insurance policy to ensure that it truly meets your needs.
Receiving a notice from the IRS for an audit can be a nerve-wracking experience. The time, effort, and potential financial consequences make it a situation you'd rather avoid. Fortunately, many audits stem from avoidable errors. Here's how you can avoid the five most common audit triggers and keep your tax returns in the clear. Ensure You Report All Income Income discrepancies are a major red flag for the IRS. While taxes are typically withheld from regular wages, other sources of income, like business earnings or capital gains, may not have taxes automatically deducted. Be vigilant in accurately reporting all sources of income, whether you receive a 1099 form or not. Document and report any non-wage income meticulously to prevent underreporting. Explain Significant Income Fluctuations Significant fluctuations in income from year to year can draw the IRS's attention. If your income varies widely, provide explanations or notes with your tax filings. Whether it's due to changes in business circumstances or other factors, clarifying these fluctuations can help prevent misunderstandings. Document Business Losses Carefully While it's common for businesses to experience losses, chronic or substantial losses can raise eyebrows at the IRS. Keep detailed records of your business finances, especially in the early years. Additionally, if you operate a sole proprietorship, ensure your business activities are distinguishable from hobbies to justify loss deductions. Support Your Deductions Certain deductions, such as large charitable contributions or home office expenses, may attract scrutiny. Be prepared to provide supporting documentation for all deductions claimed on your tax return. Thorough records can help substantiate your deductions and alleviate concerns during an audit. Accurately Value Assets For estate tax returns, undervalued assets are a common trigger for audits. When valuing assets without a public market price, seek multiple appraisals from qualified professionals. Having multiple valuations can strengthen your position and minimize the risk of an audit. Remember, even if you enlist professional help for your taxes, the responsibility for accuracy ultimately lies with you. Review your tax returns carefully before signing them to ensure everything is in order. Understanding the Different Types of Audits IRS audits come in three main varieties, each with its own level of intensity. Correspondence Audit. Conducted through the mail, this audit is often triggered by missing information or minor discrepancies. Office Audit. Requires a visit to an IRS office, typically for more complex tax returns or multiple disputed items. Field Audit. The most comprehensive type, conducted in person at your home or business, involves a thorough examination of your return. Regardless of the type, the IRS will provide a written request for specific documents beforehand. By being proactive and thorough in your tax reporting, you can minimize the risk of an audit and ensure a smoother process if one does occur.
