Survey shows 36% of American retirees said they collect less Social Security income than they expected — here are 3 tips to avoid a cash crunch during your retirement
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When it comes to the notion of “expectation vs. reality” — especially as it applies to disillusion in retirement — numbers truly tell the story, as reported in a study by Nationwide.
In a December 2023 Nationwide Peak Retirement Survey Insights Report, the insurance and financial services company found that basic living expenses take up more than half (53%) of retirees’ budgets. Yet many workers expect these expenses to average out at just 42%.
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In more than a third of instances (36%), retirees reported that they receive less in Social Security benefits than expected, compared to the 9% who say they receive more and 56% who collect about what they anticipated. And that 36% could grow.
Social Security’s main fund is expected to run out of cash by 2033, at which point benefits may no longer be paid in full and benefits are projected to be cut by 23%.
Yet retirees can do plenty to offset any cuts that might occur. Assuming that the U.S. House of Representatives and Senate are slow to address the Social Security funding problem, here are three ways to head off any potential cash crunch.
3. Invest in index funds
Annual benefits could be cut by $17,400 for a typical newly retired dual-income couple, according to the Committee for a Responsible Federal Budget. That impact would amount to “a lot” for 71% of people in pre-retirement and roughly three-in-four currently retired (74%), per the Nationwide survey.
Billionaire investor Warren Buffett (who also happens to be 93 years old) has famously said index funds will be part of his wife’s investment plan upon his passing: In his 2013 letter to Berkshire Hathaway shareholders, he wrote:
“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”
You can take Buffett's advice and start investing in the S&P 500 through Acorns. Acorns is an automated investing and savings platform that can help you start saving without ever having to think about it.
All you have to do is sign up with your email, link your bank account and start spending. Acorns will round up your purchases to the nearest dollar, and invest the difference into a smart portfolio, in which you can choose to include ETFs tied to the S&P 500.
However, for those seeking to put their money in bonds that can also serve as a hedge against inflation for your portfolio, Compound Real Estate Bonds might offer the solution for you.
Compound Real Estate Bonds is a real estate company that offers an opportunity to earn 8.5% APY through their SEC-qualified real estate savings bonds.
Compound has a strong focus on income producing real estate and real estate private credit, which can help you diversify your portfolio and grow your money. By choosing to invest with Compound, you can boost your retirement savings over time and also enjoy the freedom of no fees or lock-in periods, giving you the flexibility to withdraw your funds whenever you need to.
2. Cut out hefty expenses
Regardless of where Social Security goes, inflation and rising expenses could cut into your retirement funds, especially if the markets that feed your 401(k) or IRA plateau.
Think: Is it time to downsize from an empty and expensive home? Relocate to an area where the cost of living and taxes are cheaper?
One way you can cut back on your expenses is byn making sure you’re not paying too much for necessities like car and home insurance. With Best Money, you can find the most affordable car insurance rates in your area in just minutes.
To get started, you can gather essential information, answer a few quick questions about yourself and your vehicle. BestMoney will compare offerings and even check for discounts from top insurers allowing you to choose the most affordable option without blowing up your budget.
Similarly, OfficialHomeInsurance can help you cut back on hefty expenses by making shopping around for home insurance simple. Their online marketplace of vetted home insurance providers allows you to quickly shop around for rates where you can save an average of $482.
All you need to do is answer some quick questions about yourself and OfficialHomeInsurance will help you find better rates.
1. Leverage other sources of income
You don’t have to take on a side hustle to unlock income from the resources you already have. Renting out a garage, parking space or spare room can make a major difference in your bottom line.
There are other ways you can invest in properties and the real estate market that don’t require you to take on property management or landlord duties.
If you’re looking to invest in real estate that is accessible to everyday investors, you can do so with online platform Arrived.
Backed by elite investors like Jeff Bezos, Arrived allows you to invest in fractional shares of rental and vacation properties while sparing you the burden of renting out your own space. You can start by browsing through their curated selection of properties, each vetted for potential appreciation and income generation. Then, you can choose the number of shares you’d like to buy and begin investing with $100.
Commercial real estate is another asset that can add inflation-hedging value to an accredited investor’s portfolio. With First National Realty Partners (FNRP), investors have access to institutional quality commercial real estate without the virtual legwork of finding the deals yourself.
Through FNRP’s secure online platform, investors can engage with experts, explore available deals and make allocations seamlessly through a personalized portal.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
