How secure do you feel while retiring on social security alone? Do you think retiring on social security alone is a safe choice?
Social security is a government-funded anti-poverty program that takes care of the elderly and citizens with financial needs. This social program was created on 14 August 1935 by former President Franklin D. Roosevelt. As of 2018, the annual budget for social security in the United States is 1.06 lakh crores USD.
Who pays for Social Security?
No wonder why people consider retiring on social security alone. There is so much money poured into it. It is funded by the workers and their employers. Every month, a 2.4 percent tax is levied from the worker’s paycheck. This 2.4 percent is split between the worker and their employer. As of now, a retiree(at the age of 66) can claim a monthly benefit of maximum $2,788. Which I feel is a good amount for a retiree.
What are the positives of retiring on Social Security alone?
1) It works great for people with a frugal mindset: If you are completely fine with not having a car, no expensive cruise ship journeys, no late-night parties, etc, then living solely on a Social Security paycheck might be a great idea. To pay for occasional leisures, you can work part-time and earn extra. There are plenty of people living under $15000 per year. It’s not a pretty lifestyle but its not bad either.
2) It can work out if you are willing to relocate: Certain parts of America are known for low taxes, cheap groceries, and low fuel prices. If you are a single person, you could easily move to a small town and live a comfortable middle-class life under $1200 per month. Fish and hunt as you will. So, no need to worry about food expenses.
What are the downsides of retiring on Social Security alone?
1) Living on Social Security alone is tough for disabled people: Social Security offers a disabled person a disability check, discounted apartments, and food stamps. This helps them get a roof over their head and puts food on their table. But life is always very tough for a person with mental/physical disability. A disabled person has special needs that can only be met by having spent a decent amount each month. Mostly their expenses are health-related.
2) Social security was never meant to be a retirement plan: Social security was only created to avoid people from going broke. It is an anti-poverty plan and not a well thought out retirement plan. Sure, you can survive on it but you will never be able to live a comfortable life. What is the point of spending your twilight years in poverty when you could live a charmed life by investing early in plans like 401k and Roth IRA?
Bottom line
Social Security is a safety net to fall on in case of a financial crisis. Do not think of it as a retirement plan. Also, only a select few can claim the benefits of it. Are you 62 years old or elder? Do you have any disability? Have you suffered horrific injuries in a natural calamity? If the answer is no, then, you cannot claim for Social Security.