Can You Afford Life on the Average Social Security Check With No Savings in 2027?
Seniors relying on Social Security may feel a slight sense of relief with the latest increase from the government. Recipients will receive a 3.6% cost-of-living adjustment (COLA) for next year, according to the Social Security Administration.
The increase means about $75 more per month for the average retired worker. The COLA is meant to help seniors better deal with inflation.
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Read on for what some financial experts told MoneyLion retirees and workers headed toward retirement need to know about the balance between relying on Social Security and digging into savings.
The Reality of Living on Social Security
The average Social Security check is around $2,000 a month. As reported by NewsNation, the 3.6% COLA means it’ll go up about $900 a year for many recipients. Where you live will greatly impact what your life will be like with an average Social Security check.
“If you live where the cost of living is lower, you can live a modest lifestyle,” said Melanie Musson, finance expert with Quote. “If you live in a higher-cost area, $2,000 a month won’t be enough to support you and you’ll need to seek government assistance.”
On $2,000 a month, you may qualify for low-income senior housing if your community offers it. Those apartments will often cost around 30% of your income, so you can expect to pay around $600 a month. If you can keep your grocery budget around $300 a month and your insurance payments around $150 a month, you’ll have a little more than $1,000 left.
A car payment might cost around $400 a month and fuel will probably cost another $100 a month or more. By the time you pay your utilities, phone bill and other regular expenses, you will likely have very little left over for discretionary spending. In some places, your budget will be even tighter.
The Pain of Inflation
Inflation hurts retirees without savings particularly hard. Prices may rise every month but Social Security does not adjust every month. A working household can seek higher wages, work additional hours or postpone retirement.
“Someone living almost entirely on Social Security has fewer options and is more likely to resort to food banks and other community programs,” said Chad Cummings, attorney and certified public accountant (CPA) at Cummings & Cummings Law. “Retirees absorb those increases from the same check until the next annual COLA takes effect and even then, that is only a half-measure because the COLAs historically lag real inflation numbers.”
The Power of Calculating Your Own Numbers
You may find it helpful to run the actual numbers when comparing the different Social Security start ages within your overall financial plan and see how each choice could affect you over time.
“Waiting generally means a larger monthly check, while claiming earlier means you start receiving that income sooner,” explained David Kon, CEO and founder of WealthFluent. “There isn’t one right answer for everyone. It depends on your health, whether you’re still working, what other income you have and, for couples, your spouse’s situation as well.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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