First Person: I Could Live on Social Security Alone

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I'm always hearing elderly people bemoan the fact that they can't live on Social Security benefits alone. It's tough to live on a fixed income. A member of Generation X, I have know what it's like to live on less. However, I have a plan for how I could live on Social Security alone if I were to lose my retirement savings to a stock market crash. If the stock market doesn't crash, but Social Security goes under instead, I could also live on a predictable amount of income from my retirement savings account. If I get my full Social Security benefits and also keep my investments, I will have more money to help my children and grandchildren. Either way, I'm not afraid of the prospects of having a fixed income. However, there are a few ways I'd prepare for my retirement in another 25 to 30 years.

Retiring at 70

The first step I'd make is to delay retirement until I'm at least 70. I know a lot of older Baby Boomers or younger members of the "Silent Generation," who retired as soon as they could at age 62. Many of them now regret their decision because they have small Social Security checks. If I wait until I'm 70, I'll have the maximum amount I could have for my Social Security check. Even if my Social Security benefits are cut or eliminated, I'd still have more money saved in my 401(k) and Roth IRA retirement accounts.

Paying off my home

My goal is to pay off my home by the time I'm 50 so I will have a number of years to put aside money into savings. Without a mortgage payment or rent to pay when I'm retired, I'll have a much better cash flow. It will make it possible to live on just my Social Security benefits. All of my 401(k) and Roth IRA money could remain so that my sons would receive a generous inheritance. Also, I could take money from my Roth IRA to help my grandchildren attend college or to pay for weddings or first houses.

Staying out of debt

Experts say a growing number of Baby Boomers are retiring with debt. According to a recent USA Today article, most Baby Boomers are one medical emergency away from bankruptcy. A survey by TD Ameritrade showed the average Boomer is a $500,000 short on retirement savings. Seventy-four percent of Boomers they surveyed said they would have to rely on Social Security in retirement. I don't want to have to rely heavily on Social Security in retirement. I want to be able to choose to live on Social Security so I can preserve my other retirement money for my heirs. One way I can do that is by avoiding credit card debt.

When it comes to planning for the future, it's fairly simply. I just do the opposite of what I see most Baby Boomers doing. Instead of retiring early, I'll retire later. Instead of using credit cards for living expenses, I don't use them. Instead of carrying a mortgage into retirement, I pay it off early. I save and invest early and often while living below my means.

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More from this contributor:

Accumulating Wealth on Less Than $30,000 a Year

Planning for a Simple Retirement

My Home is a Forced Savings Account

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