6 Ways Retirees on Social Security Can Budget for Skyrocketing Costs

While the alarming inflation rate of the last couple of years has begun to decline, many of the higher costs of things like food, gas and other services have not significantly reduced enough to make a dent in the average American’s budget.

People who rely on Social Security for a large part of their retirement income find themselves in the position of tightening their belts even more and wondering where they can possibly carve out any more.

Chris Urban, a CFP with Discovery Wealth Planning, offered tips on how Social Security recipients can budget and approach their finances to accommodate this increased cost of living.

Reducing expenses is best achieved when you have “a very detailed budget,” Urban said. First you list out your fixed expenses, those items that just can’t be changed, whether that’s a Medicare premium or your food bill (though you can almost always find ways to cut costs on food).

“Then, make a list of discretionary expenses that maybe you could do without or you could reduce them somehow and then just start to chip away at some of those discretionary ones. See where you can save some money.”

If you can’t move, and you can’t make additional income, it’s time to think about reducing expenses, Urban said. Look at your biggest bills, things like car payments and utilities and see if there are ways to lower them.

Whether this means using your appliances less often or during nonpeak hours, getting rid of a vehicle or negotiating with payers, there is almost always something you can do to reduce what you’re paying.

Moving might also have the added benefit of reducing your taxes, Urban pointed out, something you should also prioritize. 

“If you’re still working and you’re facing income tax or property tax on a home you own, are there opportunities to reduce these taxes if you move or rent?” he asked.

You might even consider one of the states that doesn’t tax Social Security

However, if you plan to move to a state that doesn’t have income taxes, such as Florida or Texas, be aware that there are other taxes that could be high, such as property taxes.

“You have to think about the tax situation and if there’s a way to leverage that either within the U.S. or even spend some time out of the country as well,” he said.

Though it’s impossible to avoid paying all taxes, there are reduction opportunities.

If you have to get rid of something you genuinely enjoy, say buying new books or watching a streaming service, consider free or discounted alternatives, such as using the library to rent videos and books or taking advantage of free, local entertainment at museums and parks.

According to Urban, if you are not tied to a physical location and you’re not already living in an affordable area, a good first step is to look into moving to an area with a cheaper cost of living. While moving itself can bring unexpected costs, if you can reduce your costs of living significantly even these fees are likely worth it.

If you haven’t retired yet but are close, one more thing you might do is delay your Social Security benefits a little longer, Urban said. 

“If Social Security is going to be a lot of your income, taking it at age 62 may not be the best idea if you’re still working and you have income anyway,” he said. The longer you delay, the more Social Security income you’ll receive.