I Asked ChatGPT How To Allocate My Social Security Benefits: Here’s What It Said
Written by
Josephine Nesbit
Edited by
Zuri Anderson
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If you rely on your monthly Social Security check, ChatGPT says to think of it as having four “jobs.” Every dollar should be assigned somewhere.
“Any good retirement income plan begins with the hierarchy of needs: Essential expenses first, healthcare second, lifestyle third and a buffer for the unexpected,” explained Steve Sexton, CEO of Sexton Advisory Group in Temecula, California. “That structure mirrors what I walk clients through every day.”
While Sexton agrees that this is a good starting point, it isn’t the whole picture.
“But where retirees get tripped up is assuming Social Security alone can neatly fit into those buckets without stepping back and looking at the whole ecosystem of their income sources,” Sexton added.
Here’s how to allocate your Social Security benefits, according to ChatGPT, and what experts have to say about it.
Cover Essential Living Expenses
ChatGPT’s first suggestion is to use your Social Security benefits to cover your non-negotiable monthly costs, like housing, groceries, utilities, transportation and insurance.
“If [Social Security] makes up the bulk or all of your income, then one must start with the essentials. Making a monthly budget of expenses is a great first step to see where exactly your funds are going,” Chris Dixon, co-founder at Oxford Advisory Group, wrote in an email. “Since SS is pretty consistent, you can determine how much is remaining after housing, food, utilities, and insurance are paid.”
Sexton also recommends matching guaranteed income with guaranteed expenses. He added, “It stabilizes cash flow, reduces decision fatigue and lowers the risk of overspending early in retirement.”
Set Aside a Portion for Healthcare Costs
Healthcare is often a major expense in retirement. ChatGPT recommends setting aside part of your Social Security check for Medicare premiums, prescriptions, deductibles and long-term care needs.
“Your next step should be to review your healthcare and long-term care plans,” Dixon wrote. “These expenses can add up quickly if you are not prepared or covered for items you may need.”
Budget for Lifestyle and Enjoyment Money
According to ChatGPT, put part of your benefit toward hobbies, travel or time with family. However, experts say this depends on how much Social Security contributes to your overall income.
Dixon recommends allocating Social Security benefits first to living expenses and healthcare, then using the remaining funds for vacations or family trips.
Maintain a Cushion for Emergencies or Short-Term Savings
ChatGPT suggests keeping a monthly buffer to handle unexpected expenses. Experts agree, but added that this buffer must fit into your overall retirement income plan.
“In years when markets are down, rely more heavily on [Social Security] and cash buffers. In strong market years, let your portfolio do more of the lifting and earmark [Social Security] for discretionary spending or savings,” Sexton stated. “This will help you avoid withdrawing from investments during downturns, which can shorten your retirement by years.”
If You Have Additional Retirement Income
Retirees with pensions, 401(k) plans, investments or part-time work can use Social Security more strategically, according to ChatGPT. This includes reducing withdrawals during market downturns and stretching their retirement accounts.
“The real power of Social Security isn’t just what you allocate it to — it’s how you coordinate it with your other assets,” Sexton explained. “For example, using [Social Security] strategically during market downturns to reduce pressure on your investment accounts is one of the smartest longevity-boosting moves you can make. It can help your portfolio recover instead of forcing withdrawals at exactly the wrong time.”
Dixon also noted that the role of Social Security changes when it isn’t your main source of income.
“On the other hand, if your SS benefits are only a portion of your total income, or maybe you don’t even need them just yet, this may change your strategy or focus,” Dixon stated.
Taxes also become a bigger focus for higher-income retirees.
If you have “significant retirement savings in tax-deferred vehicles such as IRAs or 401(k) [accounts],” Dixon wrote, you may need a proactive tax plan to minimize how much of your retirement goes toward taxes. In some cases, “delaying [Social Security] may potentially reduce your taxable income while you take money from your tax-deferred accounts.”
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