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You Can Retire on Social Security: 5 Steps That Change the Game

05/12/2014 08:04 am ET | Updated Jul 12, 2014

You can retire on Social Security and live a nice life. What? I thought that was impossible? Yes, it really can be done. I'm not advocating that you do this, but the reality is that many people are facing this scenario. We dug into our data and figured out that if you fall in that group, all is not lost. You've got options even if you haven't saved much of anything. If you remain relatively healthy and plan it properly, it can actually work. Of course, we're not talking about some kind of luxury retirement in a villa in France, but it can be pleasant, safe, and happy. And, you don't have to leave the United States (although that is one way to do it).

Let's start with some basic facts about Social Security today (all from the U.S. Social Security website). Right now, an estimated 165 million workers are covered under Social Security.

  • 51 percent of the workforce has no private pension coverage.
  • 34 percent of the workforce has no savings set aside specifically for retirement.The average amount of monthly Social Security benefits for an individual is about $1,300. Not a lot.
  • Among elderly Social Security beneficiaries, 22 percent of married couples and about 47 percent of unmarried persons rely on Social Security for 90 percent or more of their income. Ouch!

So what do you do if you are 67, single, own a car but don't own a home, and have only $20,000 in the bank? Not a great situation, but don't panic. Time to be strategic and draw up a plan that takes advantage of what you do have. Trying to save money now may seem like an impossible task. Many articles discussing this problem suggest "saving now" as the solution. Well, duh! Sure, that's a good idea and would help, but we've got to deal with reality and saving when you are either not working or not making much is not reality. Like I said, you can live on Social Security but you've got to make some very calculated choices.

If you do each of the following, and are receiving or expect to receive the average benefit amount of $1,300 per month or more, you probably can live on your Social Security. (Although, getting a part time job too might be prudent. You never know when there might be a health or personal emergency.)

#1: Find a partner in crime. If you're married, you've got one leg up. You each might receive $1,300 a month making your total income $2,600. If you're not, do it with a single friend or even get a roommate that you can pool your money with. Shared expenses for utilities, food, car, and rent will make an enormous difference in how much cash flow you have and dramatically shift the paradigm. Or consider the Golden Girls option, a group of friends sharing expenses. And it also provides a ready made social network!

#2: Live in a tax-friendly state and one that DOESN'T tax Social Security. What a lot of people don't realize is that not all states are good places to retire with regard to taxes. I'm not just talking about income tax. Right now about half of the states tax your Social Security. So if Social Security is your primary source of income, why would you live in a state that taxes it? Also, some states have real advantages for other types of tax like income tax. Again, you need to live in a state that gives you the most advantages. Some of the most tax-friendly states for retirees are: Arizona, Delaware, Florida, Georgia, Louisiana, Mississippi, South Carolina, and Nevada. Move to one of these states and you'll keep more of your money.

#3: Move to an area that has a temperate climate. It's cheaper to cool a house than heat a house. If you live somewhere that never gets too hot or too cold you can save on the months with no heat or air conditioning. You need less clothing and warm weather clothing is cheaper. Fewer coats, boots, and things. Heating costs whether you rent or own can be a huge drain on your pocketbook. So living somewhere that doesn't cuts down on this expense can make a big difference.

#4: Live like a 20-year-old. Remember when you were young and had no money? You took advantage of activities that didn't cost anything -- parks, beaches, trails, free museum days, free concerts. Make your environment your entertainment. Live some place where you like the physical environment so you can enjoy the free entertainment around you. Preferably places where you can be outside more than inside or places that have an abundance of entertainment that is cheaper. Say what you will about "early bird specials" in places like Florida (although they are now calling them something hipper, "Happy Hours"), there's huge savings if you eat at 6 p.m. instead of 8 p.m..

#5: Live somewhere that has a lower cost of living. Low costs on everything from housing to transportation to food. This can all add up and keep more money in your pocket. When you are on a fixed income paying $50 less per month for groceries can mean a lot. Cost of living data is out there (and available on our site, GangsAway!) so do your homework. You may identify a good state to live in from a tax perspective but now you need to find specific areas within that state that have a lower than average cost of living. Be sure to cross check lower cost of living areas with crime statistics to make sure you're not moving into a dangerous area. There are plenty of towns that are safe, offer good value, and will provide you with nice lifestyle.

So let's go back to our original assumption. You are a couple (married or friends) with $2,600 between you in monthly Social Security. Together you own one car and have $30,000 in the bank for an emergency.

The following is a list of states/towns where two people could live on $2,600 a month and even go to the movies from time to time. The taxes are in your favor, cost of living is reasonable and decent rentals are within budget. We also looked at the crime statistics in each town to make sure they were not high.

Delaware: Dover or Newark. (This one is for those of you who simply cannot imagine living in warm weather year round.)

There are lots of other smaller things to look at like public transportation (many have senior discounts) or walkability if you don't want the added expense of a car. But if you follow our 5 Steps for planning it out, you might just make it work.

Earlier on Huff/Post50:

Cheapest Places To Retire