3 Best Budgeting Methods for Retirees Living on Social Security Alone

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Being able to comfortably afford retirement can be challenging if you’re living solely on Social Security. When it comes to budgeting that money, there are many options that may seem appealing.

To help better understand how a few budget models may be especially helpful to you, here’s some expert-backed advice from financial pros on which ones to consider if you’re in the position of needing to make your Social Security income last.

1. Zero-Based Budgeting

A few of the money experts who talked to GOBankingRates mentioned using a zero-based budgeting approach. You create a budget where you start with your income and assign every dollar to a purpose — from paying necessary bills to savings — until you have zero dollars left. In other words, it’s a plan that uses every dollar and leaves zero dollars to chance.

“A zero-based budget is a good model for retirees living on Social Security only,” said Melanie Musson, a finance expert with Quote.com. When you plan how to use every dollar of your income, you can prioritize the necessities and make room for discretionary spending when possible. Simply start with the amount you receive from your check, then list the things you have to pay for.”

2. Bucket Method

According to Musson, the bucket method is a zero-based approach that makes it easy to visualize how to allocate funds from your monthly check.

“The bucket method wins here, period,” said Andrew Lokenauth, from Fluent in Finance. “During my decade in banking, I watched retirees who used buckets sleep better at night than those who didn’t. Here’s why it works — you create three simple buckets for your monthly Social Security check.”

Per Lokenauth, bucket one is your essentials (about 70% to 75% of your check). This covers housing, utilities, food, Medicare premiums and prescriptions. Bucket two is your buffer (roughly 15% to 20%). This handles unexpected costs like car repairs or medical copays. Bucket three is your joy bucket (the remaining 5% to 10%). This tiny slice funds what makes life worth living.

Taylor Kovar, certified financial planner (CFP) and co-founder of BudgetGTP, added that some retirees like structure and clear lines, which is why the bucket method works well. It separates the money that has to cover the basics from the money that’s more flexible, and that tends to reduce stress when Social Security is the primary income, he said.

3. Envelope Method

According to Lokenauth, the envelope method also works brilliantly for fixed-income retirees.

“You withdraw your Social Security payment in cash and divide it into physical envelopes labeled with spending categories,” he said. “When an envelope is empty, you stop spending in that category. It’s old school, but it prevents overspending better than any app I’ve tested.”

Why These Budget Models Work

“When it comes to methods, they can all work depending on the individual’s life position, but one key is to withdraw less in the first few years,” said Marcus Sturdivant Sr., managing member of The ABC Squared. “Have a clear plan for the distribution of your assets. Society does not plan beyond the accumulation phase of retirement. Find a plan to use those funds you worked so hard to earn and live the lifestyle you deserve.”

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