Ask an Advisor: We're in Our 70s With $120k and Social Security. How Can We Make It Last?

Ask an Advisor: We're in Our 70s With $120k and Social Security. How Can We Make It Last?
Brandon Renfro, CFP®
6 min read
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I’m 72 years old and my wife is 70. Over the years, some of our financial decisions were not the best, but we have enjoyed 45 years together so far, having two sons and now two daughter-in-laws and five grandchildren. Our problem is that because we wanted to give our sons the best of everything as a head start in life, we now struggle with borderline problems in our twilight years.
Due to health reasons, we both are retired and unemployable with no other income than Social Security, which allows us to save maybe $1,000 a month. We also have savings of about $120,000 in just a regular savings account. I like your thought process and was hoping you might be able to help us feel better about the future.
– Phil
Congratulations on having the ability to look back with pride on the life you’ve provided to your family and enjoyed alongside them. I think there’s a lot to be said for that. I’m half your age and hope that I can do the same when I’m 72. I’m always quick to remind people that the money isn’t the point … it’s what the money does for you. It sounds like it’s done for you exactly what it’s supposed to up to this point.
There are tradeoffs, of course. Financial planning allows you to identify those tradeoffs, measure their impact and make the choices that allow you to achieve the best outcome as you define it. There are a few things in your question that stick out to me that may provide some planning opportunities in light of your situation.
If I understand your question correctly, it sounds like you and your wife save $1,000 each month. It’s certainly possible that this is a good idea, and it may even be necessary. However, if we were talking in person, I’d dig a little deeper to find out why you’re pocketing this cash.
Here’s why that sticks out. The average Social Security benefit as of November 2023 is about $1,800 per month. If you and your wife both collect that amount then you’re saving about 28% of your gross monthly income. Even if you and your spouse both collect the maximum Social Security benefit (and I strongly suspect you don’t), you’d be saving over 10% of your gross income at 72.
Perhaps the reason you’re saving this money each month is more of an emotional response or a desire that you could overcome. If you don’t need to be saving that much, “freeing” yourself from that psychological burden and the accompanying financial strain could provide significant relief on both fronts.
Again, I’m not saying that you should stop saving – I don’t know why you are in the first place – but I would encourage you to think very critically about why you’re saving that much. (And if you need more help managing your finances before or after retiring, consider speaking with a financial advisor.)
Where Do You Keep Your Money?
It’s also worth taking a hard look at where and how you hold your savings. A savings account won’t provide much interest, although high-yield savings accounts are currently paying over 5% (as of January 2024). I’m sure you’re a pretty conservative investor. But, even a diversified portfolio of mostly bonds and certificates of deposit (CDs) could boost your savings without adding too much risk.
I’m not sure what your experience with investing is. However, it’s possible that with some self-study or a little guidance you could become more comfortable with adding a little equity to the mix as well. This could significantly increase your long-term returns.
Just be mindful of the increase in volatility. Investing too heavily in equities during retirement could expose you to unnecessary risk and a significant loss in the value of your portfolio during market downturns. However, investing too conservatively could lead you to deplete your assets early.
For some context, a portfolio of 60% stocks and 40% bonds is generally regarded as the classic retiree portfolio. In other words, you are currently “invested” extremely conservatively by normal standards.
Between 1926 and 2021, a 60/40 asset allocation posted an average annual return of 9.9%, according to Vanguard. While that doesn’t mean you can expect a 10% return every year, it does show you how investing – even conservatively – can help you over a longer timeline. (And if you need help creating an investment plan, consider speaking with a financial advisor.)
Bottom Line
A tight budget with little savings is hard for anyone. It’s undeniably harder with constrained employment prospects. But again, money spent on providing a happy home for growing children and a 45-year marriage is a good use of it, in my opinion.
Based on your question, these are the two major items I’d look at first. There are probably additional factors to consider as well that aren’t apparent from your question. Your housing expenses (or equity you can access) and state tax situation (possible move for lower taxes?) may be big ones, for example.
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Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid -- in an account that isn't at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email [email protected] and your question may be answered in a future column.
Please note that Brandon is not a participant in the SmartAsset AMP platform, nor is he an employee of SmartAsset, and he has been compensated for this article. Questions may be edited for clarity or length.