Retirees with relatively small nest eggs are generally more reliant on Social Security than those with more money saved up.

Retirees typically have to make do with what they have. Some financial maneuvering can boost their portfolio, and part-time work can add a side-stream of income, but many retired households have fixed finances. For example, take a retired couple with $200,000 in savings, plus Social Security benefits. How can they make this amount of money last for the rest of their lives? Let’s take a look at their options.

When It Comes to Retirement Planning, Sweat the Details

A couple with $200,000 in savings, as well as Social Security, will likely need to do some budgeting to make their money last. This isn’t abnormal for what it’s worth, but still an important sentiment to understand.

The contours of the couple’s financial plan in retirement will depend on some important details, including:

  • Age: At age 70, a retired couple has more options than a couple who’s 80, but they also presumably need to plan for 10 more years of longevity.  
  • Location: Location strongly determines a retiree’s costs of living. Within this question, do you own or rent your home? What are the taxes like where you live? 
  • Assets: In addition to retirement benefits and savings, do you own any major property like a home that you can borrow against or sell if you need to?
  • Health: If you need extra income to cover medical expenses, can either spouse go back to work? 

If you need help with more than just managing your investments, a financial advisor can build you a comprehensive financial plan that touches on the many elements of your financial life.

How Can You Supplement Social Security?

A couple goes over their monthly budget and determines how much income they need to generate in retirement to meet these recurring expenses.

Social Security will likely make up most of this couple’s annual income. The first step is determining what their benefits are. For example, the average Social Security retirement benefit is $1,860 per month (as of December 2023). With two people, this would pay an average $3,720 per month or $44,640 per year. After Social Security, there is portfolio income. 

There are several ways our hypothetical couple could manage their savings. One option is to set this money aside purely as an emergency fund, living entirely off of Social Security benefits. But in their 70s, this might not be the best use of their money. Instead, this portfolio could provide a small supplement to their Social Security benefits.

For example, say they followed the 4% rule and withdrew 4% of their savings in their first year of retirement and then adjusted their withdrawals for inflation each year. This could provide them an extra $8,000 in year one of retirement. This is a fairly conservative approach that could push their annual retirement income up to almost $53,000 per year.

While some retirees in their 70s may have portfolios more heavily weighted in bonds and safer investments, our hypothetical couple could also invest their $200,000 a bit more aggressively. For example, if their portfolio posted an annual return of 8% or 9% in line with historic S&P 500 averages, they could potentially afford to withdraw between $16,000 to $18,000 without going deeper into their balance. This could push their household income to nearly $63,000. However, it would come at the cost of volatility, down years and intermittent losses. 

They could also invest their $200,000 in an annuity. Depending on the contract, a $ 200,000-lifetime annuity for two people could generate about $14,400 per year in additional income, according to Schwab’s income annuity estimator. That would bring the couple’s household income to approximately $59,000 with Social Security in year one. While more reliable and consistent than income from an asset-balanced portfolio, annuity income isn’t indexed to inflation. But if you’re thinking of purchasing an annuity, you may want to talk it over with a financial advisor first.

Building a Budget

A married couple examines their streams of supplemental retirement income.

Next, it’s important to make a retirement budget. For a couple in their 70s, this won’t be the speculative exercise that it can be for couples that are still years or decades away from retirement. Instead, a couple in their 70s likely already knows what they regularly spend in retirement.

As we discussed above, our hypothetical couple could reasonably expect to have between $50,000 and $60,000 per year combined between Social Security and portfolio withdrawals. From there, the question will be spending. Is this enough to support their current lifestyle? Can this income meet their needs and, hopefully, afford them some comfort?

If not, they’ll probably want to review their expenses and see what they can cut from their budget. Reducing discretionary spending and adjusting major line items like housing costs can create more space within a monthly budget. Our hypothetical couple would want to ask themselves what their biggest expenses are and how flexible are they. For example, is it possible to move into a smaller home? Can they relocate to a cheaper area? Can they manage medical expenses differently?

Bottom Line

The point behind these income options is this: Without sufficient planning, $200,000 in savings and Social Security might be difficult to support yourself. To make it last, most retirees will need to rely on Social Security, with their savings as a form of supplemental income based on personal needs and risk tolerance. Beyond that, without going back to work, making this income last will likely require some careful budgeting.

Retirement Budgeting Tips

  • A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Building a budget is essential to making your savings last, but how do you do that? With the right strategy, you can create a solid, long-term retirement budget that gives you a good plan for the years ahead. SmartAsset also has a budget calculator, as well as a cost of living calculator that may come in handy.

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