Millions of retirement-age Americans live near or below the poverty line — 5 strategies for living on a modest income

The poverty threshold in 2023 for those aged 65 and over and living alone was an annual income of $14,614, while for a household of two adults with at least one aged 65 and over it was $18,418, according to the Census Bureau. Poverty thresholds are updated yearly.

At the end of last year, the average Social Security retirement benefit was $1,905 a month, according to the Social Security Administration (SSA), which would equal $22,860 over a year. But the amount you receive from Social Security partly depends on when you claim benefits, and millions of Americans opt to get early retirement checks, which results in lower payments. The average retirement benefit for a person aged 62 — the earliest age you can claim — was $1,298 a month, or $15,576 a year.

It’s important to remember, however, the figures above represent averages, which means many people receive even less from Social Security. The cost of living can also vary depending on where one lives. Plus, a small portion of older adults aren’t eligible for benefits, per the SSA. The Kaiser Family Foundation estimates that, as of 2022, between 6 million and 8 million people aged 65 and over were living in poverty.

Living at the poverty line is an enormous financial challenge. Here are five strategies to make the most of a modest income as a retiree.

1. Keep your housing expenses low

A person aged 65 and older typically spends $57,818 a year, according to data from the Bureau of Labor Statistics. If you’re living on considerably less, it’s important to keep your housing costs as low as possible, since shelter is probably among your greatest monthly expenses.

This doesn’t necessarily mean hanging on to a paid-off home. It may not be wise to do so if the taxes are too high and there’s a lot of costly maintenance. Consider downsizing or sharing your home with someone else, such as a partner, friend or tenant, to keep expenses to a minimum.

2. Create a detailed retirement budget

When you’re on a limited income, every dollar you spend counts. Create a budget that covers your essential needs, from food to health care to transportation. Adjust your budget regularly as your expenses shift. If the cost of gas rises over the summer, for example, you may need to scale back in another spending category to compensate.

3. Maintain an emergency fund to avoid debt

When you’re on a limited income, a single unplanned expense could drive you deep into debt. To avoid that, aim to have some emergency cash in the bank if possible. It may be wise to keep at least a few hundred dollars stashed away so you don’t immediately have to reach for a credit card when surprises pop up.

4. Take on gig work for surprise or larger expenses

You may face a number of financial surprises in retirement, as things like car and home repairs don’t go away just because you’ve reached a certain age. If you have a plan to take on side work when these expenses arise, you may not have to scramble as much. For example, if there’s a person you occasionally babysit for, or provide some type of service, maintain that relationship — they may also refer you to their neighbors when you’re looking to drum up extra cash.

5. Figure out how to enjoy retirement without spending a fortune

Perpetual boredom is not a good thing for your mental health. So, it’s important to find ways to keep busy in retirement without spending a lot.

Finding a cheap hobby can help in this department. Planting your own vegetables, for example, is an activity you might enjoy that saves you money on groceries. Restoring furniture could spare you from having to replace older pieces at home.

Volunteering is also a great way to stay busy without having to dip into your wallet, and you may find it to be a fulfilling way to fill your days.