Could you survive on Social Security?

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Could you survive on Social Security?

One out of five retirees have nothing but their government checks, and many others count on them for the bulk of their living. It's a tough existence. Here's what to expect.

By Liz Pulliam Weston
Let's say you never get around to saving for retirement. You don't work for a company that offers a traditional pension, so the best you can hope for in your old age is a Social Security check.

How bad would that be?

The answer, based on Social Security as we know it now, is: It depends.

If you didn't earn much before you retired and you're married, your lifestyle might not take a huge nosedive.

Or it may be really, really, really tight.

A third of people age 65 or over rely on Social Security for 90% or more of their incomes, the Social Security Administration says. For about one out of five people in that age group, or 22%, Social Security checks are the sole source of income.

The "replacement rate" -- how much of a worker's income is replaced by Social Security -- depends on how much you earn:

For a low-wage earner (average $16,739 annually), Social Security typically replaces 55.9% of your working pay.
For a medium-wage earner (average $37,198), Social Security typically replaces 41.4% of your working pay.
For a high-wage earner (average $81,467), Social Security replaces just 28.9% of your working pay.
Being married is better than being single since two checks are, obviously, better than one. Spouses may receive a check based on their own work records or -- if they didn't work or earned less -- checks worth 50% of what their spouses get. That boosts the replacement rate considerably:

For a low-wage couple, Social Security typically replaces 83.5% of working pay.
For a medium-wage couple, Social Security typically replaces 61.9% of working pay.
For a high-wage couple, Social Security replaces 43.3% of working pay.

$955 a month, and every penny counts
The average monthly check actually sent out to Social Security retirees, though, is just $1,007, or $12,084 a year.

Karen Raymond, 66, receives even less: $955 a month. But that check is an improvement from last year, when his check was being garnished for an old child support obligation and he was getting just $529 a month.

(Maybe being a guy named "Karen" toughened him up? "Oh, you don't know," Raymond laughed when I asked him. All he'll say about his unusual name is, "My mother refused to give up her dreams.")

Raymond agreed to share with MSN Money readers what living on Social Security has been like for him. It's the experience of just one man, of course, but it will give you some idea of the challenges.

Raymond was never a high earner. For a while, he and his late wife managed a 260-unit welfare hotel in downtown Detroit. A particularly harrowing episode with some crack addicts persuaded them to move to rural northern Michigan, where they ran a housekeeping and lawn-mowing service. ("I was the CEO of lawn mowing," Raymond said.)

But poor health (he has severe emphysema; she had diabetes, cancer and a heart condition) forced them to shutter the business when he was 60 and she was 59. They worked as cashiers and received disability payments until they qualified for Social Security at age 62. Then his wife died in 2005 of a heart attack, leaving him alone after 27 years of marriage.

Today, he watches every penny. He knows he spent precisely $959.32 in January, $935.15 in February and $694.80 during the first 17 days of March.

Where the cash goes
The biggest chunk of his income -- $278 last month -- goes to heating his small house with propane. The electric bill was $70, while trash pickup was $69. Snowplowing cost $75. His phone and cell bills run $90, while his food bill for himself and his cat, Squeaks, is under $100 a month. Taxes, car insurance and various medical supplies, like the cane he bought last month, make up the rest. Fortunately, he said, his mortgage has been paid off.

"I don't have house payments," Raymond said. "I don't think I would survive if I did."

Raymond said his life is pretty simple. Once a month he drives his 1992 Grand Am the 40 minutes or so it takes to get the nearest shopping area to buy groceries and other supplies. If he needs clothes, he gets them at the Goodwill store there. Otherwise, he pretty much stays home.

"I don't watch TV. I don't rent movies," Raymond said. "I don't go out to dinner."

His entertainment, until recently, consisted largely of reading two local newspapers, subscriptions that his sister buys him. He also recently "broke down" and got a $14-a-month Internet connection.

"I fought it . . . and felt rather superior," Raymond said, but he finally decided to see for himself what the hoopla was about. "The first night I had (an Internet connection), I was up until 3:30 in the morning. . . . The next night I looked up and the sun was coming up."

The Internet has been a good distraction from his financial concerns. He worries that something will happen to his aging car, which he can't afford to replace. And he's embarrassed by the peeling exterior of his home.

"The house needs painting. It's disgusting," Raymond said. "It's lowering my neighbors' property values."

It also bothers him that he owes $40,000 to various local medical providers, thanks to his wife's illnesses and his own care before he qualified for Medicare last year. He refuses to file for bankruptcy to wipe out the debt, hoping he'll find some way to pay. "I might (file for bankruptcy) if it were corporations," he said. "But these are local folks."

If he could pass on one bit of advice to younger people, it would be: "Save. Even if you just start off with a little bit." Raymond said people like himself, who spent their working lives getting paid by the hour, are often intimidated by the financial world and the advice they often hear.

"They hear, 'You have to save six months' salary' (in an emergency fund)," Raymond said. "And it seems like there's no way they can do that, so they don't save at all."

Nothing in the bank?
If you're approaching retirement with too little saved or are already there, here are some other thoughts about how to cope:

Investigate a reverse mortgage. If you own a home, you can get a monthly check to supplement your Social Security, or a lump sum or a line of credit, using one of these loans to tap your equity. AARP has information, or you can read more about them here.

Go smaller. Smaller homes cost less to buy, insure, heat, cool and maintain. Smaller cars typically cost less to fuel and repair. Downsizing can really save you money in retirement, and trimming your expenses before retirement can help you stockpile more funds. You might even want to try moving to a cheaper part of the country.

Double up. If you're alone, consider sharing a home or other resources with another retiree or a family member. Sharing the load can not only help you financially but socially, as it's easy to become isolated as you age. (See "Let someone else pay half your bills.")

Get help. You may qualify for food stamps, programs like Meals on Wheels, help with paying heating costs, government-subsidized housing, low-cost or "lifeline" phone service and other benefits. The Eldercare Locator (800-677-1116) can help get you in touch with your closest Agency on Aging for more details.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

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