Millions of retirement-age Americans live below the poverty line — 5 strategies for living on a modest income
The median retirement account savings balance among those aged 65 to 74 was $200,000 as of 2022, according to the Federal Reserve. But not everyone brings a large pile of savings with them into retirement.
A survey from the AARP conducted in early 2024, 20% of Americans aged 50 and over have no retirement nest egg at all. And in the absence of savings, you may find yourself struggling to pay your expenses once you stop working.
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The poverty threshold in 2023 for those aged 65 and over and living alone was an annual income of $14,614, while for a household of two adults with at least one aged 65 and over it was $18,418, according to the Census Bureau. Poverty thresholds are updated yearly.
At the end of last year, the average Social Security retirement benefit was $1,905 a month, according to the Social Security Administration (SSA), which would equal $22,860 over a year. But the amount you receive from Social Security partly depends on when you claim benefits, and millions of Americans opt to get early retirement checks, which results in lower payments. The average retirement benefit for a person aged 62 — the earliest age you can claim — was $1,298 a month, or $15,576 a year.
It’s important to remember, however, the figures above represent averages, which means many people receive even less from Social Security. The cost of living can also vary depending on where one lives. Plus, a small portion of older adults aren’t eligible for benefits, per the SSA. The Kaiser Family Foundation estimates that, as of 2022, between 6 million and 8 million people aged 65 and over were living in poverty.
But living at the poverty line doesn’t necessarily mean struggling financially day in, day out. Here are five strategies to make the most on a modest income as a retiree.
1. Keep your housing expenses low
A person aged 65 and older typically spends $57,818 a year, according to data from the Bureau of Labor Statistics. If you’re living on considerably less, it’s important to keep your housing costs as low as possible, since shelter is probably among your greatest monthly expenses.
This doesn’t necessarily mean hanging onto a paid-off home. You shouldn’t do that if the taxes are too high and there’s a lot of costly maintenance. Consider downsizing or sharing your home with someone else, such as a partner, friend or tenant, to keep that expense to a minimum.
2. Create a detailed retirement budget
When you’re on a limited income, every dollar you spend counts. Create a budget that covers your essential needs, from food to health care to transportation. Adjust your budget regularly as your expenses shift. If the cost of gas rises over the summer, for example, you may need to scale back in another spending category to compensate.
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3. Maintain an emergency fund to avoid debt
When you’re on a limited income, a single unplanned expense could drive you deep into debt. To avoid that, aim to have some emergency cash in the bank. It may be wise to keep at least a few hundred dollars in the bank so you don’t immediately have to reach for a credit card when surprises pop up.
4. Take on gig work for surprise or larger expenses
You may face a number of financial surprises in retirement, as things like car and home repairs don’t go away just because you’ve reached a certain age. If you have a plan to take on side work when these expenses arise, you may not have to scramble as much. For example, if there’s a person you occasionally babysit for, maintain that relationship — they may also refer you to other parents when you’re looking to drum up extra cash.
5. Figure out how to enjoy retirement without spending a fortune
Perpetual boredom is not a good thing for your mental health. So it’s important to find ways to keep busy in retirement without spending a lot.
Finding a cheap hobby can help in this department. Planting your own vegetables, for example, is an activity you might enjoy that saves you money on groceries. Restoring furniture could spare you from having to replace older pieces at home.
Volunteering is also a great way to stay busy without having to dip into your wallet, and you may find it to be a fulfilling way to fill your days.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.