Don’t Make This Mistake with Your Monthly Social Security Payments – It Could Cost You Everything

Social Security is a vital safety net, providing financial assistance to 72 million Americans. For many, it forms the backbone of their retirement income. Shockingly, 50% of individuals aged 65 and older rely on Social Security for at least 50% of their household income, and 25% depend on it for 90% or more of their income.

However, Social Security alone is often not enough to cover the rising costs of aging. From medical bills to basic living expenses, retirees relying primarily on these benefits face significant financial challenges. According to Steven Bosworth, managing director of Bosworth Financial Group, several essential expenses become unaffordable for retirees who rely solely on Social Security.

Medical Expenses

Healthcare is one of the largest and most essential costs for retirees. The U.S. leads the world in healthcare spending, averaging $12,000 per person annually. Those with chronic or severe medical issues spend far more.

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Even with Medicare, retirees still need to cover:

• Monthly premiums
• Out-of-pocket expenses
• Prescription medications

T. Rowe Price estimates that retirees using Medicare, Medigap, and Medicare Part D spend an average of $900 annually, but 10% spend over $4,200. Long-term care, dental care, vision exams, and cosmetic surgeries are excluded from Medicare, leaving retirees to shoulder the costs. Bosworth notes that without adequate savings, retirees may delay or forego critical medical treatments.

Vacations

Traveling in retirement is often seen as a reward for years of hard work, but for many retirees on Social Security, vacations are out of reach. Bosworth highlights that Social Security benefits are usually needed for basic living expenses, leaving little to no room for leisure.

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Consider these costs:

• A budget-friendly international trip (12 nights) averages $3,251, according to ValuePenguin.
• A domestic trip (4 nights) costs around $581.

With the average monthly Social Security payment at $1,907 in 2024, most retirees cannot afford even modest domestic travel, let alone international trips.

Car Maintenance

Owning a car is often necessary, but the costs of maintaining one can quickly overwhelm retirees on fixed incomes. Bosworth explains, “The cost of repairs usually requires hundreds of dollars at once, making it unaffordable for many.”

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According to CarInsurance.org, annual car maintenance costs range from $1,200 to $1,800, with unexpected repairs adding an additional $500 annually. Older vehicles, in particular, often require costly repairs, making reliable transportation a significant challenge for retirees.

Car Insurance

Insurance costs continue to rise annually, leaving many retirees struggling to keep up. Fixed Social Security payments often do not cover the increasing premiums. For example:

• Homeowners insurance for a $300,000 home costs an average of $2,600 annually in the U.S.
• Car insurance premiums vary widely based on location, coverage, and vehicle condition, but older drivers often face higher rates.

These rising costs, combined with stagnant Social Security benefits, can create financial strain for retirees trying to maintain their homes and vehicles.

The Bigger Picture

Social Security was never designed to be the sole source of income for retirees, yet millions of Americans depend on it. Unfortunately, the modest average payment of $1,907 per month falls short of covering basic needs, let alone additional expenses like travel, healthcare, or home repairs.

To ensure a more secure retirement, it’s crucial to plan ahead by:

1. Building a retirement savings plan early to supplement Social Security.
2. Investigating additional income sources, such as part-time work or investments.
3. Cutting unnecessary expenses where possible to free up funds for essential costs.

Relying solely on Social Security is a risky strategy for retirement. While the program provides critical support, its limitations highlight the importance of preparing a comprehensive retirement plan.

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