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How to Plan for a Low-Income Retirement


Retiring on a low income may seem challenging, but with the right strategies, resources and investment choices it is possible to live securely during your retirement years. To start you should calculate what your potential retirement income is likely to be so that you can plan ahead for what to do once you get there. This guide aims to help you navigate the complexities of planning for a low-income retirement, although these are general tips and should be adapted to individual circumstances. You may want to work with a financial advisor to give you the best chance of improving your low-income retirement and to help you reach your goals. 

How to Calculate Your Potential Retirement Income

Understanding your current income and expenses is the first step in calculating your potential retirement income. You can use a retirement calculator to help estimate what your current trajectory might be for when you hit retirement age. This is the first step to help you make a plan for either living a low-income retirement lifestyle or improving how much you can save before retirement.

The calculation for how much money you’ll have in retirement is going to heavily depend on where your assets are and the likelihood of those assets growing between now and retirement. For example, if your assets are primarily in the stock market then you can estimate that typical return over time but if it’s in real estate then it will depend on the market. 

Considering economic variables like inflation is also important in estimating your future purchasing power in retirement. You can project inflation based on government resources or use a specific tool to help you estimate what inflation might cost you from now until you hit retirement age. 

Programs to Help Those With a Low Income in Retirement

There are numerous programs designed to support those with a low income in retirement. Understanding these programs and their benefits can significantly improve your financial security during retirement. You can do this by referring to official government websites to ensure accuracy and guard against potential fraud. Here are some examples of programs that you might be able to use:

  • Social Security Benefits: Benefits provided by the Social Security Administration form a major part of most retirees’ income.
  • Medicare: Once you reach the age of 65 then you might qualify for Medicare, which is healthcare that comes with a reduced cost. 
  • Medicaid: If your income is below the poverty level then you may qualify for Medicaid, which will take care of all of your health expenses. 
  • Food Stamps: If you qualify for Medicaid then you may qualify for food stamps, which is money each money to cover your grocery costs. 
  • Supplemental Security Income (SSI): The government provides this program for people with limited income or disabilities.
  • Housing Assistance: Some may qualify for housing assistance from the USDA or from local state programs to either buy or rent. Some housing is available specifically for those in retirement with low income in some states. 

Budgeting Tips for a Low-Income Retirement

A woman looking at her bills in retirement and having a low income to pay them.

For a more secure low-income retirement, budgeting is crucial. You may want to use a budgeting app if you struggle to live within your means. The worst thing you can do for your retirement savings is to spend more than you make each month. This can prevent you from saving for retirement now and from making your expense requirements in retirement. 

Planning travel and properly managing debts can also come in handy. Once you hit retirement it’s important to save for any big expenditures. So if you want to take a trip you need to save up the money first. You don’t want to spend money you don’t have when you’re living on a low-income retirement. Getting into debt is the worst financial situation for you at that point. 

You may want to consider downsizing or moving to a more affordable area once you hit retirement so that your monthly expenses are less than when you’re working full-time. This can free up cash to save for travel or to meet your necessary expenses each month so that your retirement years aren’t spent worrying about money. 

What to Invest in if You’re Expecting a Low-Income Retirement

Making smart investments—guided by the advice of a financial advisor—has the potential to enhance your retirement savings. Low-risk investments may include government bonds or certain mutual funds. You can receive a decent return without a high risk of losing what you’ve invested. This enables you to keep as much as you can for retirement, especially if retirement is getting close. 

Diversification of your investment portfolio may help spread risk but is not a surefire way to safeguard your retirement savings. The longer you have until retirement the more you may want to look at a diversification strategy that includes investments in higher-risk assets that have the potential for higher returns. The right investments, though, for you will depend on how long you have until retirement and what your appetite for risk might be.

Bottom Line

A woman stressed because her bills are too much for her low income retirement

Planning for a low-income retirement can be complex. However, equipped with the right tools, resources, strategies and professional advice, you can take control of your retirement planning. Remember, the guidelines presented in this article are intended to provide useful information, but each individual’s financial context is unique. The information given does not guarantee results but rather provides a roadmap for potential strategies. Starting now to plan your retirement regardless of your income is essential in order to best prepare for retirement. 

Tips for Retirement Planning

  • When planning for retirement, there are things you can do now and when you hit the right age to still meet your basic needs. You can improve the amount you have saved between now and then through the help of a financial advisor. They can help you with your investment planning and overall management. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now
  • You can see what different asset choices can do to your portfolio by using an asset allocation calculator

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