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What You Should Do First With Your Social Security Payment

Social Security Benefits

It is essential to plan how you will supplement your income and spend your money during your golden years, whether you are 20 years old or 10 years away from retirement. This requires many soon-to-be retirees to make a plan for their Social Security payments.

According to the 2019 Consumer Expenditure Survey from the Bureau of Labor Statistics, older Americans spend approximately $50,000 annually on necessities such as food, housing, transportation, and healthcare. However, the average Social Security benefit for retired workers is $1,615.81 per month, or $19,389.72 per year. If you plan to rely solely on Social Security, you will quickly realize that this amount is likely insufficient to cover your retirement expenses.

Nevertheless, you should not waste your Social Security check. Therefore, it is essential to budget carefully and spend your benefits wisely. Continue reading to learn more about how to manage your Social Security check.

Delay It

Even if you just turned 62 and are eligible for Social Security retirement benefits, it is important to remember that you are not required to begin receiving them immediately. In fact, for some individuals, waiting an additional eight years is financially prudent.

Why would anyone delay receiving benefits to which they are entitled? Simply put: money. The lengthier the delay, the greater the monthly payment. For those born in 1943 or later, Social Security payments increase by 8% per year for each year of deferral after age 62, up to age 70. If you don’t need the money immediately and have other sources of income or savings, do the math to determine if it makes sense to wait longer to cash your checks.

Verify Your Earnings Statement

Your Social Security benefit is determined by your highest 35 years of earnings as reported to the Social Security Administration. Because any record may contain inaccuracies or omissions, you should verify your Social Security earnings record before applying for benefits. If, for instance, the Social Security Administration is missing one or two of your highest-earning years, your benefit could be permanently reduced by a substantial amount.

Create a login to verify your Social Security record. Here, you can view your earnings history and other essential data, such as your estimated future retirement, disability, and survivors benefits. If you discover any errors, please contact the SSA at 1-800-772-1213.

Budget Your Monthly Social Security Payment

According to Kimberly Foss, certified financial planner and founder of Emperion Wealth Management, the first thing retirees should do with their Social Security check is confirm they received the correct amount. After verifying the accuracy of your payment, it is time to allocate it appropriately.

Bill Kearney, the proprietor of Integrated Financial Concepts, advises creating a spending plan prior to spending Social Security checks. This is how:

Keep Your Income Under Control

If you want to maximize your Social Security benefits, you must monitor your outside income. If you are younger than full retirement age in 2021, your Social Security benefit will be reduced by $1 for every $2 over $18,960 you earn. If you reached full retirement age in 2021, your benefit will be reduced by $1 for every $3 you earn above $50,520 up until the month in which you reach full retirement age. After reaching full retirement age, there are no further reductions to Social Security benefits.

Prioritize Your Fundamental Needs

The next step is to distribute your Social Security benefits. Leonard Hayduchok, chief executive officer and president of Dedicated Financial Services, recommends treating your Social Security check like a paycheck. Utilize the benefits to pay for recurring expenditures such as rent and groceries. According to the BLS survey, people 65 and older spend the following annual amounts on food and housing-related expenses:

You should allocate between 60 and 70 percent of your annual Social Security benefits to cover these costs, though for many retirees, this will be impossible. If your annual benefits equal the national average of $1,615.81 per month or $19,389.72 per year, then 60 percent of your Social Security check — or $11,633.83 per year — will not be sufficient to cover the expenses listed above.

Nonetheless, it is prudent to allocate as much as possible to food and shelter. These are, after all, your fundamental requirements; without them, you cannot survive. Keep in mind that once you’ve used your check to cover these essential costs, you’ll likely need to rely on other sources of income to pay for other expenses.

Retirees whose food and housing costs exceed their Social Security payments should seek ways to reduce these costs. For instance, moving to a city where you can live comfortably on Social Security could be an option.

Utilize Your Social Security Payments To Pay For Healthcare Costs.

After budgeting for your fundamental needs, you should pay for your medical costs. Let’s assume you’ll spend close to the BLS-estimated $6,833 annual national average cost of healthcare for Americans aged 65 and older. If you spend close to this amount, it would be prudent to allocate the remainder of your check to this expenditure. However, it is also crucial to prepare for rising healthcare costs that your Social Security checks will likely not cover.

According to the 2019 Retirement Health Care Costs Report by HealthView Insights, the average retired 65-year-old couple can expect to spend $12,052 per year on Medicare parts B and D and supplemental insurance. This cost increases as you age. The average 70-year-old couple spends $16,068 annually on these items, while the average 75-year-old couple spends $21,706 and the average 80-year-old couple spends $28,552.

Put the remainder in your savings.

After paying for necessities and healthcare, the average retirement benefit may leave you with only a few hundred dollars per year. What should you do with your remaining cash?

The owner of Prosperity Financial Group, Edwin Cruz, advises his clients to set aside 10 to 20 percent of their Social Security checks for unforeseen circumstances. In addition, he suggests adjusting this amount over time until the retiree has accumulated six to nine months’ worth of living expenses.

Following this strategy and assuming you receive the average retirement benefit, you should aim to save at least $1,825.91 per year until you have six to nine months of emergency savings. However, since you’ve already used your Social Security payments to pay for other high-priority expenses, you’ll likely need to rely on other sources of income to build an emergency fund.

Don’t Forget to File Child Tax Credit Claims

If you are receiving retirement, disability, or survivor benefits and have dependent children, you can also file for them. A qualifying child can receive up to fifty percent of a parent’s full retirement or disability benefit, and up to seventy-five percent of a parent’s benefit in the event of death. The maximum amount of money that can be paid to a family is determined as part of the Social Security benefit calculation.

To qualify, a child must be under the age of 18, between the ages of 18 and 19 and enrolled full-time in grade 12 or lower, or 18 or older with a disability that began before the age of 18. Despite the fact that this is not technically your Social Security benefit, it is still an SSA payment that can help your family get by.

Extra Expenses Unlikely That Your Social Security Benefits Will Cover

Retirees must allocate their retirement funds carefully to ensure that they can cover all expenses. In addition to basic necessities, healthcare, and savings, your Social Security benefits may not be sufficient to cover additional expenses. Keeping this in mind will be crucial if benefits are reduced in the future.

For instance, you will continue to pay taxes in retirement. Depending on your financial circumstances, you may be required to pay taxes on your Social Security benefits, making it more difficult to cover retirement expenses. You’ll also need a plan for transportation expenses and any upcoming vacations.


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Although Social Security may not be sufficient to cover all of your retirement expenses, you can still reduce your expenses and generate income. You will increase your chances of enjoying a comfortable retirement if you do so.

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