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If a person worked from ages 22-65 is it possible they can live off of Social Security alone in retirement without savings and a pension plan?
It all depends, of course, on lifestyle, expected expenditures etc on the one hand, and expected SS payment on the other.
The person in question will need to adjust their spending to their new lower income upon retirement. But that is not enough. Let's say the person in question is a homeowner with no mortgage. Every now and then, the house will need costly repairs - a new water heater, a new roof, a new refrigerator, etc. Those things require savings -- or further reductions in consumption.
While it is true that many people live on SS for people who always had minimum wage or just above minimum wage for their entire careers the amount can be quite small. I believe that my aunt received about $725 a month. Perhaps an income of $8,700 a year may seen like a lot to you but it certainly was difficult for a single woman living on her own to survive on that pension.
And that is one reason that I have a problem with the SS spousal benefit. My SIL will be receiving $1500 a month in spousal benefit at FRA vs $900 a month based on her earnings. She and my brother have substantial retirement income. My single sister will receive less than $1000 a month and has no other retirement income. WHY??
My sister had more opportunities than the elderly aunt and I have criticized her for living high and not saving. But the SS system is unfair to singles and needs a major overhaul.
If a person worked from ages 22-65 is it possible they can live off of Social Security alone in retirement without savings and a pension plan?
Probably not well in New Jersey...but then again, I know someone who does just that. She didn't work all those years, either.
She was widowed at 43 with three teenagers, and she had been a SAHM since marriage. She worked at different jobs, doing office work, bookkeeping, etc. At one point she sold their family home and moved to San Francisco, then back to NJ when she realized the west coast wasn't for her.
She retired at 65 from the office job she held then and started to collect her Social Security. She is 75 years old now. She owns a condo that she bought 17 years ago as a foreclosure and has three years left on the mortgage. She takes advantage of the freeze NJ residents can get on their property taxes at the age of 65. She gets SNAP benefits. She was eligible to get her furnace and refrigerator replaced through an organization called Comfort Partners, which helps low-income people with such things.
Until two months ago, she had made some money off the books for eight years each morning bathing and feeding a woman with dementia. It started as two days a week, then three, and then near the end it was seven days a week. The woman died, and she misses that income. She does some type of online surveys, too, and occasionally gets a check for $40 or so for doing that.
Everything she buys she gets on sale or uses a coupon. Astoundingly, to me, she sometimes lends her grown children money or lets them use her credit cards for major purposes.
If a person worked from ages 22-65 is it possible they can live off of Social Security alone in retirement without savings and a pension plan?
Absolutely, but only if you're fairly high income for 35 of those years.
Here is the math from my Social Security statement with 35 years of maximum contribution to the system:
Collect at 62: $24,108/year in Social Security benefits
Collect at 66 8 months: $33,720
Collect at 70: $42,828
If I were wiped out financially, I'd have to move to a lower cost of living area but I could live on $24,108 in a very scaled back lifestyle. My plan is to not collect until age 70 since Social Security is COLA-adjusted. With a paid-for house, I'd have no problem living on $42,828. Where I live, I could rent something modest and be OK. My IRA/401(k) required minimum distributions end up being 100% disposable income.
The problem is that most people start collecting at age 62 so they're receiving the lowest possible Social Security check for the rest of their lives. With a bit of deferred gratification, you can do better than that assuming you are physically and mentally still able to continue working.
Old and outdated are relative if the device performs the task for which designed.
My Kenmore Avocado Laundry pair date from the 1960's... hand me downs from my grandparents and glad to get them... as I was for the 1967 Amana Freezer.
Kitchen is mostly GE from 1978
Amana Refrigerator is 1980
Zenith Console TV is 1982 and I have done streaming from the laptop when family came to visit... also used the VCR to play some old tapes the nieces found... I was the only one with a VCR
My neighbor got the first of her flatscreens and gave me her Toshiba picture in picture cinema series TV
Maybe I'm blessed in that those around me have had to replace appliances on a regular basis... the neighbor with the TV is now on her third flat screen... the first was replaced just before the warranty was over.
It really does seem there is a difference between wants and needs...
I still own the $800 car I bought in High School and drove daily for more than 20 years.
I inherited not too long ago a fridge from the 1970s that still works perfectly after running continuously for all those years. I am lucky to have a modern appliance last 5 years yet alone 40+. Stuff today is made cheaply and prone to fail, even high end brands. A $700 front loader washer completely fell apart after less than 3 years of use every couple of weeks. It's just sad. .
But wasn't that the point of saving it? So she could have it for those potential expenses that became very real at the end of her life? She sounds as if she planned well.
I am sorry for the recent loss of your mother.
Thanks. After 3 years of hospice with her telling us that she did not want to live that way in her more lucid moments, it helped some to know it was relief for her but it still is hard seeing a parent pass.
It is one of the possible things the money is there for. I was responding to someone else bringing up one of our common complaints in that it doesn't seem like it should be so expensive (and isn't in other parts of the world). She co-owned a house with her SO that was not their primary residence but was going to be "someday" before her health faltered. He will likely lose that (had to put it in a trust to get her where she was).
The problem is that most people start collecting at age 62 so they're receiving the lowest possible Social Security check for the rest of their lives. With a bit of deferred gratification, you can do better than that assuming you are physically and mentally still able to continue working.
I think the other thing that can turn out to be a mistake is not using retirement savings to provide income to delay SS even if it means drawing savings down faster than you want. Like you, I could get over 40k at age 70. Most of my retirement savings are tax deferred. if I pay myself from age 64 to 69, the tax rate on that money will be far less than I shielded it from putting it in. I should have enough equity to downsize and have no mortgage, insure against most big monetary needs and be better off with the higher income than scraping by on less with a large balance I am afraid to spend.
I have a brother that is 57 and doesn't have two nickels to rub together and never will. He might get a small union pension and a small SS check, but it's hardly enough. Every dollar he ever had burned a hole in his pocket. I gave him over $4K some time ago knowing I'd never see it again, and I haven't. No more of that.
What's funny is that he thinks that everyone else is the cause of all of his problems, financial and otherwise. Never once has he ever taken responsibility for anything. At age 57 that is not going to change and I only hope his son will take care of him in his old age. He has alienated every one in the family and they've all had enough. It's sad to say, but you reap what you sow, and now he is paying the price.
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