5 Ways to Supplement Social Security Income During Retirement

Daniel Penzing
Written by
Last update:

Start Funding a Retirement Plan

Social Security is important to retirees, but should only be considered a partial solution to income security during retirement. Most Americans don’t have enough money to fully fund their own retirement plan, and will need to supplement their income with an external source…which Social Security is. If you’ve been putting off funding a retirement plan for yourself because you know Social Security will take care of you, you are going to be in trouble.

Social Security money will only go so far, and you will probably find yourself supplementing it with money earned from a financial planning strategy. The sooner you start focusing on a retirement plan, the better off you will be. Don’t forget that your income will probably decrease every year. The amount of monthly money you would earn from Social Security is not guaranteed to increase with the cost of living. If you wait until you’re older to start funding your retirement plan, you will miss out on years of earning potential.

Start by contributing as much as you can to a retirement plan, and then use more traditional strategies for making money. If you’re working, don’t forget to also put in as much as you can save into a savings/investment account.

Don’t Allow Yourself to Un-Save

Retirement, the period of time when a person is no longer actively working but is not yet ready to fully relax and give up work completely, is most often associated with Golden Years, sitting on a beach in Hawaii and finding that dream house on the beach in Italy. What it’s really like is something much different.

Retirement is a great risk to take and as you transition from your full-time job, you may find yourself confused about where you’re supposed to get money. After all, money is what keeps your car working, the lights on and that pizza in the fridge.

Retirement Savings Are the Key to Your Golden Years

It’s important to realize that your retirement savings are the best way to prepare for the cost of retirement you will face. In the past, a person’s retirement was supported by funding from the government, or they received it from their employers. However, the number of people with stable, full-time jobs like this is declining, and so is the number of people who will be able to retire.

If you’ve been paying in to Social Security for years, you’ll want to ensure it’s enough to live well in your retirement. But how much will you get?

Save Outside a Retirement Plan

It is very easy to fall off the saving wagon and allow life to overwhelm you. Social Security will help, but if you want to make the most of retirement, every dollar of your income should go toward building wealth.

That means setting up a retirement plan, maxing out your other tax-advantaged accounts like a health savings account (HSA), and using tax-efficient vehicles like IRAs. Of course, the more you can save inside your retirement accounts, the better.

However, you can also encourage your employer to set up a non-retirement savings account, or consider an automatic savings plan that contributes to a non-retirement IRA or 401(k) account at deposit intervals.

Contributions are not tax-deductible, but they are tax-deferred. That means you will pay taxes on your money when you withdraw in retirement. You can also use these retirement accounts to reduce your taxable income as well as to save on taxes. But you cannot send money directly into a Social Security account.

You could set up a system that directs a percentage of every paycheck into a retirement plan. Then, you can use the money left over to fund an off the plan account. The average person can expect to earn around two percent interest from these accounts.

Plan on a Post-Retirement Career or Business

If you are earning an income during retirement, you can avoid supplementing your social security income with your retirement savings by simply spending down your savings during retirement. However, if you have already spent your retirement savings and are relying on social security income, consider supplementing some of your income from another source.

What type of job is best suited for you in retirement?

If you are considering a post-retirement job, think very carefully about these factors:

Your health: You need to be relatively healthy for a full-time job. If you have a chronic illness or disability, then you may need to spread that income out over the course of a year to avoid exceeding your medical limits. Interest in working: If you’re not passionate about a cause, you’ll be spending most of your time at home. Specific knowledge, skills, or experience: In order to obtain a job, you need to know the requirements of the job and how to do the job. Marketability: Do you do something that no one else does? Or do you do something that a lot of people do? Flexibility: Would a job give you any flexibility to do all the things that you want to do? Ease of quitting: It can be difficult to stop working if it takes a while to build a client base.

Get Out of Debt Completely

Social Security is finally here. Isn’t it great to release those worries and start thinking about just living? The end result of getting yourself into a position to retire is that you start improving the quality of your life, and as much as that is a wonderful feeling, there may be sacrifices you have to make.

Some retirees, whose budget is limited, face the difficult challenge of getting the most out of their retirement budget. Making the right financial decisions as a retiree is no easy feat, but the most important thing to remember is your main objective… to live comfortably.

The good news is that living well in retirement does not necessarily entail living extravagantly… it’s all about getting creative and making the right choices. Following are useful suggestions for increasing your income and filling in those gaps:

Consider other income generating assets: Your home, for example, could be rented out to generate supplementary income. Another potential source would be your retirement account. You could take a loan from your IRA or 401K. The interest rate may or may not be tax deductible, but that’s a question for your accountant.