Is it possible to live on Social Security benefits and nothing else?
Can you do it in Texas?
Those questions came to mind as I contemplated the deposits my wife and I are receiving this year, up a handsome 8.7% from last year. They total, before Medicare premium deductions, just shy of $72,000. That’s more than the $67,321 median household income in Texas, according to the U.S. Census Bureau.
To be sure, we’re fortunate. We worked hard. We have work histories that are long and strong. We’ve paid in a bunch. We’re getting a bunch back.
But what about everyone else? How many retirees, single or coupled, have enough in Social Security benefits to pay the bills for a modest standard of living?
The answer, it turns out, is quite a few.
Not everyone, to be sure. But quite a few, particularly if you choose where you live carefully.
Calculating a living wage
To address the question broadly, I looked for two kinds of data. The distribution of Social Security benefits, for starters, to understand the range of Social Security retirement benefits. Then I needed estimates for a basic cost of living in different Texas cities.
The distribution of Social Security benefits is available on the web. It’s available in increments of $100 a month. They go from “less than $100″ to “$4,700 or more.”
In December, before the cost of living increase:
—the median monthly benefit was $1,700 to $1,799
—the most common benefit (the most recipients) was between $2,000 and $2,099
—the top 25% of benefits was between $2,200 and $2,299
—the top 10% of benefits was between $2,800 and $2,899
—the top 1% of benefits was between $4,200 and $4,299.
For estimates of the cost of living, I went to the MIT Living Wage study, a project managed by Amy K. Glasmeier, a professor of economic geography and regional planning at MIT. The project uses different data sources to estimate the costs for a basic standard of living all around the country. The Living Wage project figures are available by state, by county and by major urban area. The website estimates the cost of food, medical, housing, transportation, civic and other expenses. It then calculates the taxes that would need to be paid to net that amount.
If you are surprised at how low these figures are, remember that they are based on estimating a “Living Wage” — the income it takes to make ends meet in different places. It’s nowhere near Easy Street or Fat City.
For Texas as a whole, the required annual income before taxes is $34,931. Taxes of $4,266 take it down to a spendable income of $30,665 a year. Since you don’t pay employment or income taxes if you live on Social Security alone, the important number is what you’d need to spend. That’s $30,665 for a single person. It comes to $49,612 for a couple. In both cases, the single biggest expense is shelter.
No surprise there.
Texas’ top spot?
But it costs less to live in some parts of Texas than in others. The places you’d think would be dirt cheap aren’t. My first thought, for instance, was a remote town near Big Bend and along the border with Mexico. Like Terlingua in Brewster County. Other than the annual chili cookoff, Terlingua doesn’t have a lot of people. It’s the kind of place where everyone is on a first-name basis. Some may like it that way for a reason.
Living there, with or without a last name, will set you back $27,853 a year, according to the MIT Living Wage study website. That’s about the same as living in San Antonio and, just saying, I like the Esquire Tavern on the Riverwalk at least as much as I like the Starlight Saloon.
The Big Dog at the expensive end of the scale was also a surprise.
It wasn’t one of the usual suspects: Austin, Dallas or Houston.
It was … Midland.
Yes, Midland, a city that’s 297 miles from the nearest Nieman Marcus (Fort Worth), is the most expensive place to live on a Living Wage scale in Texas.
The central Texas city clocks in at $31,788 a year. It edges out the expected places — Austin-Round Rock ($31,251), Dallas-Fort Worth-Arlington ($30,483) and Houston-Woodlands-Sugarland ($29,327).
The least expensive city in Texas is another surprise: Longview.
It checks in at $23,960. El Paso follows at $25,115. McAllen-Edinburg-Mission ($25,383) and Wichita Falls ($25,563) are close behind.
Longview also has something that most Texas cities don’t have: rain. While there are other places in East Texas that have more rain, Longview typically gets 49 inches of rain a year. That’s more than average in the U.S. and, yes, more than the 39 inches of rainfall in Seattle.
When you put it all together, it looks like you can live somewhere in Texas as a single person on your Social Security benefits if your benefits are at least $1,997 a month. That’s a level 40% of all retirees receive. To live in the most expensive cities in Texas, you’ll need to have a benefit of at least $2,649 a month. If you have that, you’re in the top 15% of all Social Security retirees.
If you’re starting to get fixed, hard-edged ideas about all this, stop now. Besides the uncertainty of any of the cost estimates, there’s a whole encyclopedia of fudge factors — choices we can make as consumers — that can make living on Social Security benefits easier.
Looking at the data, two things can make the difference between comfort and penury.
The biggest is what economists call “economies of shared living.” That’s what happens when two people decide to live together. If you look at the Living Wage study estimates of the cost of living for two people, you’ll find that the second person only raises expenses by about 60%.
So, if two people with equal work histories and benefits decide to live together in pricey Midland, their individual benefits only need to be $1,928 a month. Instead of needing to be a single worker in the top 15%, they each would only need to be in the top 40% of beneficiaries.
That’s a big change.
Do the same exercise for low-cost Longview and each person needs a benefit of only $1,635. That means each would need to have a work history in the top 54% of all Social Security beneficiaries. That’s a lot of people. It’s a majority of retirees.
When most people talk about a couple living together, they are thinking about married couples. But “economies of shared living” is delightfully pronoun-free. It’s two humans under the same roof, sharing expenses. And it could be more, as in the now ancient TV show "The Golden Girls."
The second major factor is shelter, the biggest single cost for the vast majority of Americans, working or retired. In expensive Midland, shelter for a single person costs $13,780 a year. That’s way more than the $10,741 cost for Texas as a whole and more than double the $6,155 cost in inexpensive Longview.
Shelter is also a cost where economies of shared living show up, big time. The shelter cost for two people, in Texas as a whole, is $11,808, up very modestly from the $10,741 cost of shelter for a single person. One consequence is that the cost of shelter shrinks from 35% of spending for a single person to less than 24% of spending for a couple.
If a retiree has the good fortune to have no cost of shelter — as in having an “in-law” apartment in an adult child’s home or living in a backyard cottage — about 50% to 60% of all singles and couples could afford to live anywhere in Texas on their Social Security benefits alone.
So, does Social Security solve the retirement income problem? No. But here in Texas, it goes a lot further than most people think.
All of this assumes you don’t have significant health or mobility issues. If you do, all bets are off.
Statistics and estimates are one thing, but decisions about how we spend the money we have are another. Spend your money smartly and it will go further.
Here are a few of the fudge factors that stretch dollars for some retirees. Some are big. Some are small. I’m sure retired readers can add many more.
What’s important is overcoming our consumption sleep-walk. Retirees can lose the habits acquired from our work-obsessed society. They no longer need to pay attention to a working world saturated with advertisements promoting material aspiration, luxury indulgence and delusions of entitlement.
The wonder of America isn’t its massive excesses in luxury spending. The rich in other nations spend even more exuberantly. Daily examples from all over the world are dutifully reported on the web.
No, the wonder of America is its drive to distribute products at the lowest possible cost to as many people as possible. That’s why a careful search at home can beat the siren calls for moving to Mexico, Panama, Portugal or whatever foreign country is deemed the latest for Americans to retire and “live like kings.”
It also helps to be old. Seriously.
Just as older women are happy to leave their high heels behind, older men have a license to leave a lot of dumb spending habits behind. Being old is a whole new day.
—Make sure you retire debt-free. That means you drive a no-payment car or car(s). If you own a home, it means you have paid the mortgage off before you retire. It also means you avoid credit card debt like it was Count Dracula himself.
—Don’t be afraid of downsizing your home if the numbers work. (They often don’t, for lots of reasons.) Always remember that the cost of shelter is the biggest expense, and therefore the biggest cost lever you can pull. Just like it was in all of your working life.
—If you own your home, get your property tax break for seniors.
—Cook at home and share meals with friends. You’ll eat healthier and have less waste at lower cost. All you have to do is pay attention. Retired, you have the time to do that.
—Review your automatic payments regularly. Cut services you don’t use. In the Internet era it’s easy to accumulate hundreds of dollars a month in automatic payments. Some will hardly be visible on your credit card. Say goodbye to anything that’s unnecessary.
—Review your insurance policies, particularly life policies. You may be paying for something you, or your heirs, no longer need.
—Sell, or give away, things you don’t need or use. This is an activity with all kinds of benefits. It will also remove a great burden from your children. If you ask, you’ll be surprised at all the stuff your kids don’t want. So, turn it into cash.
—Shop at resale, thrift and consignment stores. It’s fun. I don’t do it, but it’s because I don’t shop. My wife and daughter shop resale. They enjoy the time together. They have fun with the challenge of finding charming things. There’s a reason conventional retail is struggling and resale is booming.
—Have lunch at a Senior Center. The one in Dripping Springs, for instance, offers a three-course lunch for $5. It’s all good, healthy food. It costs less than McDonald’s or What-a-Burger and you might meet a new friend.
Again, all of this works if you don’t have significant health or mobility issues.