I’m a Financial Advisor: 9 Things You Should Start Doing Now If You’re Worried Social Security Won’t Be Enough
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Preparing for retirement can be a daunting task, especially when you add up your cost of living expenses and compare it to what your fixed income will now be. For many about to retire, Social Security looks to be their only stream of income, yet so many worry that it will not be enough money to cover the bills and make ends meet.
GOBankingRates reached out to several financial advisors to get their nine things you should start doing now if you’re worried Social Security won’t be enough. Here’s what they said about handling your money.
Delay Retirement Until 70
Marty Burbank of OC Elder Law suggested that people concerned about not having enough money to live on in retirement maximize their Social Security benefits by waiting until age 70 to claim.
“Your benefit increases 8% each year you delay, adding thousands per month. Use other income to bridge the gap until 70,” Burbank said.
Explore Affordable Housing Options
Housing is often the largest expense in retirement, according to Andrew Latham, a certified financial planner with Super Money.
“Consider moving to a more affordable area or exploring senior housing communities that offer lower costs and amenities suited for retirees,” Latham said.
“For instance, moving from a high-cost urban area to a suburban or rural area with lower living costs can significantly reduce your monthly expenses,” Latham added.
Cut Current Costs
It’s never too early to save or reduce your expenses, even before you retire.
“There are resources like SNAP and utility bill discounts — check if you qualify,” said Prestizia Insurance founder John Crist. “Have family contribute to household expenses in exchange for reduced rent. With planning, managing costs, and tapping resources, Social Security can go further.”
“Cut the cable cord, eat out one less time per week, or pick up a side gig and contribute that money to your retirement fund,” said Ben Klesinger, the CEO of Reliant Insurance Group and Helping Hand Financial.
Reducing unnecessary spending and reevaluating everyday expenses can trim $100-$200 per month, according to John F. Pace, CPA and tax manager for Pace & Associates CPAs.
“I worked with a couple who reduced their grocery bill by $150/month by clipping coupons and buying generic brands. They used the savings to fund an IRA,” Pace said.
“Small steps make a big difference over the long run. The time to start planning and saving is now,” Klesinger added.
Leverage Home Equity
If you own your home, Latham said that you can consider tapping into your home equity through a reverse mortgage or home equity line of credit (HELOC).
“A reverse mortgage allows you to convert part of your home equity into cash, which can supplement your Social Security income,” Latham said.
“However, leveraging your home during retirement to pay for living expenses is not ideal and should be avoided unless absolutely necessary,” Latham added.
Plan as Far Ahead as Possible
“Increase your 401(k) contribution to at least 15% of your paycheck,” said David L. Blain, CFA and CEO at BlueSky Wealth Advisors.
“The more you can sock away now, the better,” Blain continued. “At 10%, you’re barely keeping up with inflation. Every 1% increase makes a big difference over time thanks to compound interest.”
“One client contributed enough to get her company match, adding over $20,000/year to her account,” Pace said. “She invested it and enjoyed solid growth over 20+ years of saving. By retirement, she had over $500,000 — a result of consistent contributions and long-term growth.”
“Open an IRA in addition to your 401(k) and max out your contributions,” Blain said. “IRAs provide tax advantages and more investment options.”
Blain added that retirees monitor investments and make adjustments as needed.
“While in the accumulation stage, focus on growth,” Blain said. “As you near retirement, balance growth and income investments to provide lifetime income. Review fees and make changes to lower costs.”
Look For Additional Income
“The first step is developing additional income streams,” said David Fritch of Fritch Law Office and CPA Practice.
“For current retirees, consider part-time work, driving for a ride-share service, or consulting in your former field,” Fritch said. “For those still working, start investing as much as possible in a diversified portfolio. Real estate is also a great way to generate passive income.”
“An extra $500-$1,000 a month will significantly impact your retirement savings and provide extra cash now,” Blain agreed.
Prepare For the Worst
“Plan ahead by calculating your retirement income needs and shortfall. Determine how much you’ll receive from Social Security and any pensions,” said Fritch, who explained that the gap is what you’ll need to fund through your own savings and investments.
“Save and invest as much as possible in tax-advantaged retirement accounts like 401(k)s and IRAs,” Fritch added. “These provide more opportunity for your money to grow over the long term. The sooner you start planning and saving, the better prepared you’ll be.”
“Increase retirement plan contributions as much as possible, at least 10%-15% of your income is ideal. The more you contribute, the more you benefit from compounding returns and company matches,” Burbank said.
“I had a client increase just 2% and gained over $200k in their 401(k) over 15 years,” Burbank said.
Reduce Healthcare Expenses
For current retirees struggling with high healthcare costs, Fritch urged them to explore options to reduce expenses.
“Shop Medicare Advantage or Medigap plans to find lower premiums and out-of-pocket costs. Look into prescription drug assistance programs that offer discounts on medications,” Fritch said.
“Review medical bills for errors and negotiate lower rates for expensive treatments or procedures. Managing healthcare costs is key to making the most of your Social Security income,” Fritch said.
Ask For Professional Help
It’s never too late to take action, according to Burbank.
“Meet with a financial advisor to develop a personalized plan, adjust as needed, and find ways to generate income,” Burbank advised. “With planning, you can have a secure retirement even with Social Security as your main source of income. The key is starting now.”
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