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Living on less in retirement

By Jennie L. Phipps ·
Tuesday, September 21, 2010
Posted: 5 pm ET

A lot of the talk  about retirement planning focuses on big dollars -- $1 million 401(k)s and maxing out Social Security by holding out until age 70, when you could potentially collect nearly $50,000 per year.

For most people, retirement doesn't work out this way. According to the U.S. Census Bureau, in 2008, the median annual income for households where the householder or spouse is 65 or older, was $30,774. In other words, half of the households live on less money and half live on more.

We'd all like to live on more, but here are two examples of how the 50 percent who are living on less do it. These are real people, although I've changed their names.

Jake, 72, and Ethel, 67, rely on their combined $1,425 Social Security checks, a total of $17,100 per year. Both of them worked for many years in the hotel industry in the North at jobs that didn't come with retirement plans. When they quit working, they  used their modest savings to buy an older trailer in a safe and well-tended park near Tampa. They own an old car, but often rely on public buses, which run down the street in front of the park -- or they walk to nearby stores and an occasional restaurant. Their lot rent is $350 per month, plus $35 per month for electricity. They splurge on TV and cell phones, spending almost $200 per month for the combination. Medicare and the Veterans Administration provides Jake with near cost-free health care. Ethel gets Medicare and some assistance from Medicaid. The remainder of their money is for groceries, car insurance (Ethel doesn't drive), clothing, a weekly dinner out, pet food and some savings for emergencies. When they need something special, Jake does some odd jobs for the park owner. It's not a luxurious life, but both like the weather and are grateful that they don't have to do the physically demanding work that they did for years.


Sam lost his job three years ago managing a heavy equipment rental service. He was 64. He had no savings; he had lost everything in an ugly divorce. He immediately took Social Security of $1,600 per month, or $19,200 per year. He was concerned that this wouldn't be enough for him to live on for the rest of his life, so two years ago, he went job hunting. After many turn downs, he showed up in a suit at a regional grocery chain's job fair and was hired on the spot at $10.50 an hour. He's gotten a couple of raises and he's now making $11.25 an hour for about 30 hours a week, or $16,000 per year. In total, he makes $35,200, which is about half of what he earned at the equipment rental service. But he's a single man with modest expenses, who is very involved in his synagogue -- a commitment that doesn't demand a lot of money.

Sam rents an efficiency apartment in a senior citizen cooperative for $198 per month, including heat. He lost his company car when he lost his job, so now he drives a used car he bought with cash. The availability of some meat and produce that isn't salable, but is still edible cuts his food bill significantly. He has basic cable and a cell phone with limited minutes, which together cost him about $75 per month. His car insurance is another $75 per month.

He's working as many hours as he can get and saving as much as he can in the grocery store's 401(k) to build a nest egg, so he can actually enjoy retirement some day.

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