6 Smart Ways To Use Your Social Security Income After Retiring

Core Insights - The article emphasizes the importance of effectively utilizing Social Security checks as they only replace about 40% of pre-retirement income on average [1] Group 1: Essential Expenses - Social Security should be viewed as the foundation of retirement income, primarily used to cover non-negotiable costs such as housing, groceries, and healthcare [3] - Essential expenses like utilities, food, and Medicare premiums should be prioritized with Social Security income, while discretionary spending should come from savings or investment accounts [4] - Covering essential expenses first ensures that Social Security income provides steady support before drawing on other savings [5] Group 2: Coordination with Other Income Sources - Social Security is one component of a comprehensive retirement plan, which should also include pensions, 401(k)s, IRAs, and brokerage accounts [5] - It is recommended to coordinate withdrawals and investments to smooth cash flow and minimize taxes [5] - Consulting with a CPA can help map out projected income and required minimum distributions, aiding in the management of tax brackets over time [6] Group 3: Emergency Cash Cushion - It is advisable to maintain a cash cushion of six to twelve months' worth of essential expenses in a highly liquid account to handle unexpected costs [7] - This buffer allows individuals to manage surprises without needing to sell investments during market downturns [7]