It’s the nightmare scenario that all retirement planning is designed to prevent: running out of money in retirement. Eighty-three percent of low-income Baby Boomers will run out of money, and 13% even in the highest income bracket won’t have enough at the end of retirement. So then what? There are options, but running out of money is never a positive thing. Save now so you can avoid spending your senior years in a financial tailspin.
People who run out of money in retirement can still get Social Security. If you or your spouse worked for most of your life, you’re probably eligible. Social Security is unlikely to cover all of your expenses, and it certainly won’t support a luxurious retirement. But it can help you cover the basics—food, clothing, gas money or bus fare. If you live with loved ones, you may even be able to scrape by on Social Security alone.
This is why it’s so important to talk with a financial advisor to determine when to take Social Security and what steps you can take to maximize your monthly Social Security check. Social Security is what you’ll have to fall back on if your money disappears late in life.
Leaning on Loved Ones
People who run out of money in retirement often end up leaning on loved ones. No one wants to be a burden to their family in their old age. But if you’ve been a good parent or friend and are willing to be kind, gracious, and maybe help out a little around the house, your children, siblings, or close friends may be willing to let you live with them. With this significant expense taken care of, you’ll only need to worry about smaller expenses, such as food and clothing.
Your home is probably your most valuable asset. If you have somewhere else to go—your children’s house or a small, affordable apartment, for example—selling it is a way to stretch your retirement savings.
However, you should also consider remaining in your home and looking into a reverse mortgage. If you’re early in retirement, selling your home might not be enough to cover your expenses anyway. A reverse mortgage, by contrast, offers access to money that you don’t have to repay as long as you remain in your home. You may have to meet other terms and requirements, and you’ll need to be at least 62 before you can apply for a reverse mortgage.
Medicare covers all seniors, but Medicaid is only for people living in poverty. Medicaid can cover many health expenses, including extensive care at a skilled nursing facility if you need it.
A wide variety of low-income programs, both government-supported and charitable, can help you make ends meet if you run out of money. Some options include:
- Temporary Assistance for Needy Families (Welfare)
- Supplemental Nutritional Assistance Program (SNAP)
- Local food pantries and soup kitchens
- Church programs for seniors
- Low-income housing
- Government and private grants for seniors
And finally, if you’re young and healthy, you may want to consider going back to work, or at least working part-time. Retirement is long, and a job can help you make the most of these years.