The Tightwire Act of Living Only on Social Security
By PAUL SULLIVAN | New York Times2012/9/13
Yahoo! Finance/Edward Linsmier for The New York Times - Greta Morrison sold her house in Indiana this year and rented an apartment in Florida to be closer to a daughter.
LIVING on an inflexible budget, one that teeters on the brink of poverty, is not what most people equate with retirement. But that is pretty much what anyone who lives solely on Social Security can expect.
According to the Social Security Administration, 23 percent of married couples and 46 percent of single people receive 90 percent or more of their income from Social Security. Furthermore, 53 percent of married couples and 74 percent of unmarried people receive half of their income or more from the program.
Such statistics represent a group of people forever trying to make ends meet at a time when their health may be declining, their friends dying and their ability to do things not what it used to be. According to a report by AARP, the lobby for people older than 50, three out of five families headed by a retiree over 65 had no retirement savings.
“It gets hard for a lot of people to imagine getting along on just the Social Security check, but obviously millions of people are doing it,” said David Certner, legislative policy director for AARP. “They’re really living month to month and relying on that check. Some people have a paid-off home, but they’re still dealing with upkeep, insurance, taxes, plus utilities and health care.”
With an average monthly payment of $1,200 per individual (the actual amount is determined from one’s earnings record), nobody is getting rich on Social Security; that’s $14,400 a year, not much above the federal individual poverty line of $10,890, and payments aren’t adjusted by regional differences in the cost of living.
Modest as that average income is, someone would need about $300,000 to buy an equivalent annuity with a built-in cost-of-living increase, Mr. Certner said. Few retirees have savings like that.
Sue Ann Flatley, who lives outside Tampa, is an example of what it is like to live almost entirely on Social Security with no savings and no house to sell if need be. Ms. Flatley, 72, stayed home when her children were young, but then worked for 30 years before retiring as a certified nursing assistant at age 65.
Divorced with three children in their 40s, Ms. Flatley receives $890 a month in Social Security. Her rent, in subsidized housing, is $128 a month. She has two bills, one from a clothing store credit card, the other from medical expenses from a hip replacement, that she is working to pay down at $50 to $100 a month. Then there are her regular expenses, like phone, cable, electricity and trash collection bills.
“I have to be really careful with my check,” she said. “Usually every other month I can go to the grocery store and spend $130 to $150. I buy a lot of freezer things. I’ve been a diabetic for five years, and I can’t eat a lot of things.”
She says that it is the unexpected expenses that are difficult to manage. In August, she had to pay $72 to get new license plates for her car and $28 to change the address on her driver’s license. “I would have been all right if I didn’t have to buy the tags on my car,” she said.
Ms. Flatley is part of one of the most vulnerable groups: older single women. According to an AARP report, women are more likely to live in poverty in retirement than men across all ethnic and racial groups.
Another typical situation is the one Greta Morrison, a former insurance claims administrator, found herself in a few years back. She had a paid-off house 12 miles from downtown Indianapolis. But she never had more than $4,000 in the bank, and her $1,100 a month Social Security and $200 pension from the Travelers Insurance Company did not cover her expenses.
“I was cash-poor and dirt rich,” she said. “I was having to use my home equity loan to pay for home expenses, my taxes, my nursing home insurance.”
Mrs. Morrison, 81, sold the house this year and rented an apartment in St. Petersburg, Fla., to be closer to one of her daughters. Her son, 52, is unemployed and lives with her.
“Money is a definite concern every time I break a twenty,” Mrs. Morrison said. “I can’t be cavalier about money. I don’t eat out, but I had a lot of years of eating out. I don’t subscribe to a lot of magazines. I don’t buy clothes, but I don’t go anywhere I need them.”
Yet selling the home was a great relief, she said, even though such a step is undoubtedly traumatic for others in her situation. When all the bills were settled, she put $130,000 in the bank. After years of struggling, she rented a condo on Snell Isle, a nice neighborhood in St. Petersburg, that consumes most of her Social Security check.
“I make it now because I sold my home,” she said. “My apartment costs more than I can afford, but at 81, I figured why not?”
She is, in effect, making a classic retirement bet — that she will die before the money from her house runs out.
Retired married couples have to make that calculation for two people, but they have a financial advantage on those who are single or widowed, Mr. Certner said. It is not just two Social Security checks, but the economies of scale that come from sharing all the expenses.
Karl Steven Forister, who lives with his wife, Phyllis, in Renton, Wash., just south of Seattle, said that between their two Social Security checks, which total $3,000 a month, and extra money they earn doing background checks from their computer at home, they get by.
There was a time, though, when Mr. Forister seemed to be someone who would have an easy retirement. He worked at the company that became U.S. West Communications as a human resource representative, eventually rising to a position where he traveled the country to recruit people.Then in 1990, the company offered early retirement and he took it, at age 50, as a lump-sum payment. First he had a heart attack and then, in 1994, his wife of 33 years divorced him after meeting someone else, he said. She got half of everything they owned together, including his pension payout.
At that time, his luck with investing wasn’t much better. “You remember the dot-com bust?” he asked. “I survived it, but it was costly.”
Today, the Foristers live in a house subsidized by the Senior Housing Assistance Group, a nonprofit group in the Puget Sound area. They can walk to a senior center run by the city of Renton, and there he works on art projects and they both exercise at no charge. They walk to a Safeway to buy food, and once a month they drive to a Sam’s Club to stock up on larger purchases.Their big expenses, he said, are rent, co-payments for health care and food. He said that two years ago when their car broke down, Mrs. Forister’s mother, who was then 91, moved into a retirement home and gave them her 1993 Maxima, which still runs well.
“I’m probably too goofy to know any better, but life is pretty good,” he said. “I don’t have to mow the lawn. I don’t have to repair anything. I think we’re very fortunate.”
Others see Social Security as a way to keep going, perhaps in a simpler way. James Leonard Park, an eccentric former Methodist minister who retired in 1968 at age 27 with $5,000 in the bank, has taken this approach to another level. Until he started collecting Social Security at 65, he lived a bohemian life in Minneapolis on about $2,000 a year. Most of that came from teaching adult education classes on voluntary simplicity, though he said he has written 15 books.
“That was enough to keep body and soul together,” said Mr. Park, 71. “I’ve never had a very expensive social life.” (He posts his expenses online.)
Social Security for him is only $138 a month because he paid so little into the system. But through Supplemental Security Income, which he said he qualified for because of his low income, he receives an extra $496.67. He said the $7,600 he gets a year is like a big raise.
“I’m very thankful to all the taxpayers of the United States who provide this Social Security benefit to me,” he said. “I think of it as an annual income for life.”
Still, in Mr. Park’s case he had the advantage of a father who worked as a doctor leaving him a small inheritance. He used it and money that came from a city program to buy a 1,000-square-foot condominium that is paid off. He said it is worth $140,000.
Those truly getting by on just Social Security, like Ms. Flatley, are not so lucky. They are renters who live month to month and hand-to-mouth.
“I’m doing well with my expenses, but it’s a struggle,” she said. “When there’s a birthday you want to buy a gift or a gift card, but you can’t do that.”
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