Summers in retirement can feel very different than they did in your working years. For many people, they can finally enjoy their leisure time, perhaps visiting with family or taking trips. But for retirees living largely on Social Security, it can also be one of the most expensive times of year.
Fortunately, you don’t necessarily need a bigger benefit to enjoy the season. Here’s how financial experts recommend making your Social Security income stretch further during the summer months.
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Why Summer Can Strain a Social Security Budget
Social Security benefits stay the same every month, but summer expenses don’t, according to Jacob Bayer, a certified financial planner (CFP) and founder of Jacob Bayer Wealth Management.
Three expenses tend to hit at the same time in summer that are not caused by poor budgeting or spending discipline, he said: “the cost of cooling down, travel and summer activities with the grandchildren.”
He said this can add several hundred dollars in seasonal expenses or a 20% to 30% impact on the average $2,000-ish monthly benefit.
Budget for Summer All Year
The best way to “stretch” Social Security is by planning ahead and creating a “summer fund,” Bayer said.
Bayer suggested retirees plan an annual budget and divide the total by 12.
“Retirees who saved $100 a month from September through May started June with a $900 cushion, so summer expense spikes are less of a budgetary crisis.”
Hayley Dickson, a CFP, founder and CEO of RIPPL Wealth Management, recommended also treating summer travel as a year-round expense, since travel costs can be exorbitant.
“Summer should not be a surprise financial stress, it should be a time of merriment where you feel not only that you deserve to spend on travel, but that you’re prepared for it all along,” she said.
Watch for These Summer Expenses
Retirees may also underestimate some kinds of spending that tend to happen more in the summer. For example, Bayer said, hosting family and grandchildren over the summer months — including food, entertainment and travel or lodging costs — can easily add $500 to a month’s budget.
“Since it doesn’t seem like discretionary spending, it never makes it onto the budget. It feels like love.”
Dickson also sees vacation or travel costs adding up beyond the obvious flights, gas, eating out and hotels. These costs can include boarding pets, parking, increased mobile phone and data charges, vacation clothing or gear and the recovery spending of restocking the groceries when you return home.
She suggested retirees assume an additional 20%-25% in discretionary vacation costs in addition to the fixed costs.
“If a trip is budgeted for $3,000, plan for an extra $750 in smaller unexpected costs that will give you a financial hangover,” she said.
Use Senior Discounts and Flexible Travel Timing
Summer fun doesn’t have to cost full price. Retirees often have scheduling flexibility that allows them to travel during cheaper periods, Bayer pointed out.
“Traveling at the end of the first summer vacation week, instead of mid-summer, can bring approximately 25% to 40% of the cost of summer travel down,” he said.
Seniors should also ask about senior discounts wherever they shop. Credit card rewards, memberships to American Association of Retired Persons (AARP) and other memberships may also provide discounts.
Don’t Raid Your Retirement Savings Without a Plan
Though Social Security alone can require tighter budgeting, Bayer cautions against making large, unplanned withdrawals at any time of year, much less summer, unless it is a true emergency.
“If an increase in portfolio withdrawals is necessary, then the household should withdraw from cash reserves to avoid the sale of portfolio assets,” he said.
However, for retirees who have robust retirement savings above and beyond Social Security, Dickson said it’s OK to give yourself permission to enjoy it, so long as you understand “what a sustainable withdrawal rate looks like for your situation.”
Always Spend Intentionally
While summer may feel like a time of reward, it’s still important to enter it with “planned spending,” Bayer said, “so that September does not come with a financial hangover.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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