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Can You Live Off of Your Social Security Check?
September 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.
As a business owner, safeguarding your enterprise against unforeseen events is crucial for long-term success. Life insurance offers several strategies to protect your business, ensure continuity, and provide financial stability during challenging times. Two primary methods are buy-sell agreements and key person insurance. Buy-Sell Agreements A buy-sell agreement is a legally binding contract that outlines the procedure for transferring ownership if an owner departs due to death, disability, or retirement. Funding this agreement with life insurance ensures a smooth transition and financial security for the remaining owners and the departing owner's beneficiaries. Types of Buy-Sell Agreements Cross-Purchase Agreement: Each owner purchases a life insurance policy on the other owners. Upon an owner's death, the surviving owners use the policy proceeds to buy the deceased owner's share. This method is often suitable for businesses with a few owners. Entity Purchase Agreement: The business itself owns life insurance policies on each owner. If an owner passes away, the business uses the proceeds to buy back the deceased owner's share, redistributing it among the remaining owners. This approach is typically preferred for businesses with multiple owners. Key Person Insurance Key person insurance is a policy that a business takes out on essential employees whose loss could significantly impact operations. The business owns the policy, pays the premiums, and is the beneficiary. If a key person dies or becomes disabled, the policy proceeds can be used to: Cover the costs of finding and training a replacement. Offset lost revenue resulting from the key person's absence. Reassure clients, creditors, and investors of the business's stability. This strategy is vital for businesses where certain individuals are integral to success, such as top executives, lead developers, or primary sales personnel. Additional Strategies Beyond buy-sell agreements and key person insurance, consider these life insurance strategies: Collateral Assignment: Use a life insurance policy as collateral for business loans. In the event of the owner's death, the lender is paid from the policy proceeds, preventing financial strain on the business. Executive Bonus Plans: Provide key employees with life insurance policies as part of their compensation package. This not only offers them personal financial protection but also serves as an incentive for retention. Deferred Compensation Plans: Promise to pay key employees a certain amount at retirement, funded through life insurance policies. This ensures the business can meet its obligations without affecting cash flow. Implementing life insurance strategies is essential for business owners aiming to protect their enterprises from unforeseen events. Work with us to explore your life insurance options and we can help your business remain resilient and continue to thrive.
Term life insurance provides coverage for a specified period, such as 10, 20, or 30 years. If you outlive your term policy, the coverage ends, and no death benefit is paid to your beneficiaries. As you approach the end of your term, it's essential to evaluate your current financial situation and consider options to maintain life insurance coverage if needed. Options to Consider Annual Renewable Term: Some term policies offer an option to renew annually after the initial term expires. While this allows you to extend coverage without a medical exam, premiums typically increase each year based on your age, making it a potentially costly option over time. PROGRESSIVE.COM Policy Conversion: Term-to-Permanent Conversion: Many term policies include a conversion feature, allowing you to convert your term policy into a permanent life insurance policy, such as whole or universal life, without undergoing a medical examination. This option can provide lifelong coverage and build cash value, but premiums will be higher than those of the original term policy. NEWYORKLIFE.COM Purchasing a New Policy New Term Policy: Applying for a new term life insurance policy can be an option, especially if you're still in good health. However, premiums will be higher due to increased age, and you may need to undergo a medical exam. Permanent Life Insurance: Alternatively, you might consider purchasing a permanent life insurance policy, which provides lifelong coverage and accumulates cash value. This option is generally more expensive but offers additional benefits. Exploring Alternative Coverage: Final Expense Insurance: Designed to cover end-of-life expenses, such as funeral costs and medical bills, final expense insurance offers a smaller death benefit with more affordable premiums and may not require a medical exam. Guaranteed Universal Life Insurance: This type of policy provides coverage for a specified age (e.g., up to age 90 or 100) with lower premiums compared to whole life insurance, focusing primarily on the death benefit without significant cash value accumulation. Take Action Now As your term life insurance policy nears its expiration, assess your current financial needs and health status to determine the most suitable course of action. Consulting with an insurance professional can help you navigate your options and select the best solution to ensure continued financial protection for your loved ones.
