The average annual spending for U.S. households of those 75 years and older was $53,481 in 2022, according to the Bureau of Labor Statistics. With a modest $2,000 monthly income from Social Security and $50,000 in savings, it’s natural to be worried about outliving your savings and looking for some guidance.
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The average life expectancy for 79-year-olds is around nine years, according to Social Security. Using a Fidelity retirement calculator, we can see that if your savings are invested and earn an average annual rate of return of 5%, you can afford to make nine yearly withdrawals of around $6,700.
According to the Social Security Administration (SSA), the estimated average monthly retirement benefit for January 2025 was $1,976. This would translate to almost $4,000 for a couple. But many seniors receive less, which makes budgeting and planning critical.
Let’s walk through steps you can take to navigate this financial situation.
Maximize your home value
While owning a home outright is a huge advantage, maintaining it can be costly.
You can consider downsizing. Moving to a smaller, lower-maintenance home or a senior-friendly community can reduce property taxes, utilities, and upkeep. Downsizing can free up capital and reduce monthly costs significantly.
Renting out a spare room or partnering with another senior through vetted home-sharing programs can also help with supplementing income and provide companionship and added security. Programs like the National Shared Housing Resource Center offer resources for income-generating home-sharing options.
Optimize your healthcare
Medicare provides essential coverage, but supplemental insurance can be pricy.
Seniors with limited income should check eligibility for Medicare Savings Programs (MSPs). These state-administered programs help pay Medicare premiums, deductibles, and co-pays for low-income seniors. Also, learn about the “Extra Help” program for prescription drugs. The SSA offers assistance to reduce Part D prescription costs based on income and resources.
Staying on top of these programs through resources like Medicare.gov can save hundreds or even thousands of dollars every year.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Reduce your living expenses
Stretching $2,000 a month requires some discipline, but living a frugal lifestyle while still enjoying quality of life is key.
Make sure you create a monthly budget and try to cut discretionary spending.
Track all expenses and categorize needs vs. wants. You can consider using free budgeting tools if you’re tech-savvy. Limit dining out, subscriptions, and non-essential purchases. Buy in bulk, shop sales, and utilize food assistance programs if eligible.
Local senior centers, food banks, and utility assistance programs can help reduce expenses.
Prepare an emergency fund
Unexpected health expenses, home repairs or other emergencies can quickly throw you off a tight budget.
Usually people are advised to keep at least 3-6 months worth of expenses in a highly liquid account, such as a dedicated high-yield savings account. This means that if you need to access funds right away, you won’t have to tap your investments or take on debt.
It may be tricky to do in your current situation, but retirees are generally advised to build larger emergency funds. Consult a trusted financial advisor about this if you can.
Abid Salahi, finance expert and co-founder of FinlyWealth, told GOBankingRates retirees should aim to keep 12 to 18 months of living expenses in their emergency fund.
If you’re a senior living on a tight Social Security income, it’s important to be proactive about emergency savings, optimize your home and healthcare costs, and have control over daily expenses. By taking these steps, you can avoid running out of money and feel more secure in your retirement.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
