For many people, the goal is to be able to treat Social Security as a supplement to retirement savings and income. The average monthly retirement benefit is $1,485.63, which—depending on where you live and your expenses—may or may not be enough to live comfortably. So if you're approaching retirement having saved less than you'd like, and hope to live on Social Security alone, you'll need a game plan to make it work.

Key Takeaways

  • Waiting to take Social Security until age 70 will increase your benefit by 8% a year beyond full retirement age.
  • Medicare and Medicaid can help seniors pay healthcare costs in retirement.
  • Relocating—whether it's moving to a state with a lower cost of living or retiring abroad—may help your Social Security dollars go farther.

Who's Banking on Social Security?

Nearly nine out of 10 Americans ages 65 and older currently receive Social Security. The Social Security Administration (SSA) estimates that among elderly Social Security beneficiaries, 37% of men and 42% of women rely on Social Security for 50% or more of their income.

According to a 2019 Gallup poll, 57% of retirees rely on Social Security as a major source of income, while only 33% of near-retirees say they expect Social Security to be a major source of income once they retire.

Near-retirees may expect less from Social Security because the system's funds are predicted to run out of reserve money by 2034, at which point—if no changes are made to the system—incoming taxes will become insufficient to fully fund new payments.

However, many Americans may end up more reliant on Social Security than they expect. In the Gallup poll, for example, just 25% of non-retirees say they are saving enough for the day when they quit working. Half think they should be saving more, while 18% have no retirement savings at all.

Living on Social Security as your primary or only source of funds takes some creativity. These strategies can help you successfully navigate your finances during retirement.

Delay Taking Social Security

Full retirement age is 67 for older adults born in 1960 or later. You can begin taking your Social Security benefits as early as 62, but your benefits will be reduced for each year you take them ahead of schedule.

On the other hand, if you can put off taking your benefits past full retirement age, you'll see your monthly benefit check increase. For someone who was born in 1943 or later and waits until age 70 to apply for Social Security, the increase should come to 8% per year. (After age 70, there's no benefit to continuing to delay.)

Downsize Your Home

Housing costs can easily eat up your Social Security benefits. The Bureau of Labor Statistics estimates that people ages 65 to 74 spend approximately 34% of their household income on housing each year. That amount climbs to 36.2% for those ages 75 and older. 

Moving to a less expensive home can have a significant effect on your monthly cash flow. Ideally, if you have a mortgage on your home, you will have fully paid it off before you retire.

Relocate

Moving to a less expensive home in your current city can help free up cash for retirement. But in some cases, a more significant move—to a different state or even moving abroad—can be worth considering.

If you live in a state with a high cost of living and high taxes, moving to one with a lower cost of living and more favorable taxes can make your budget easier to work with.

Streamline Your Other Expenses

If you've managed to make your housing more affordable, the next step is reducing other line items in your budget, such as utility bills, transportation expenses, and food costs.

The key question that you must ask is: What do you really need to have an enjoyable retirement, and what can you live without? Could you ditch cable TV, for example, in favor of watching TV online? Could you swap an expensive hobby like golf for a low-budget one like gardening? If you own two cars, could you sell one of them? These kinds of decisions can be tough, but they can make your transition to retirement on Social Security benefits a much smoother one in the long run.

And if you've got substantial obligations, such as credit card debt or a car loan, you'll want to get them paid off before retiring, if possible.

Keep Healthcare Costs Under Control

Healthcare in retirement can be extremely expensive, so you need a plan to pay for it, especially if you have an existing medical condition. While Medicare can cover some of the costs once you turn 65, it doesn't pay for everything. If you've retired and your income is exclusively coming from Social Security, you’ll need to look beyond Medicare to pay for your medical expenses.

$300,000

The amount a 65-year-old couple will need for healthcare costs (excluding long-term care) during retirement, according to Fidelity Investments.

Medicaid, for example, is available to low-income seniors, and you can have this coverage along with Medicare. It's designed to help pay for premiums and pick up the tab for things Medicare doesn't cover, including long-term care.

The Bottom Line

Retiring on Social Security alone is far from ideal. If you've still got time before you retire, consider looking for ways to build up your savings. Start by chipping in as much as you can to your employer's retirement plan, if you have one, especially if it comes with a matching contribution.

If you don't have a 401(k) or similar plan at work, an individual retirement account (IRA) is another way to grow your savings. The more you set aside now, the less pressure you'll feel to make your Social Security benefits stretch.

Nevertheless, if you do have to stretch your benefits, downsizing, relocating, cutting your overhead, controlling healthcare costs, and delaying taking Social Security can each make a big difference.