It’s been said by some people (e.g., former Senator Judd Gregg, R-NH) that the Republicans in Congress aren’t likely to pass any debt ceiling bill until a few social security checks are missed.
“My gut tells me that we’ll need a weekend of drama — maybe a weekend of the government not paying its bills — politicians need drama to make something happen. As soon as social security checks don’t go out, the politics will change. I suspect it’ll take artificial drama to get closure past the House.”
“Boehner understands that a shutdown is bad for his caucus and that there’s something viable short of a shutdown but right now… it’s a 50-50 chance that we go into a few days of disruption.”
You know I think Judd Gregg may be right. Which led me to ponder about what people who don’t get their social security income (SSI) checks in August might have to do. Oh, I don’t mean the well-off, the billionaires and millionaires. To them SSI is just a little bonus. No, I mean those people who rely heavily on their SSI or SSDI check from the government to pay the bills, buy food, etc.
Let me say for starters that I have a direct stake in this discussion. Our family’s major source of income is social security disability (SSDI) my wife receives because she had pancreatic cancer and, as a result of treatment became a brittle diabetic and suffered severe loss of her cognitive functioning due to the chemotherapy drug used during her radiation treatment). You can read about her story here. I am also disabled by a rare autoimmune disorder, TRAPS, but my ERISA benefit plan’s disability trustee (Liberty Mutual Insurance) denied me benefits and that denial was upheld by the federal district court because a doctor I never met hired by the insurance company reviewed my medical files and determined I was not disabled (you can read about my story here). I was told after the lawsuit ended the way it did not to bother filing for SSDI as there was little chance I would be approved.
So, if the government stops sending out Social Security Checks in August (and you know they aren’t going to suddenly stop paying interest on the T-Bills or end the wars in the Middle East) what’s a social security beneficiary to do when the checks stop coming?
1. Retirement Savings. First off, for those of you who have IRA’s or money in a 401-K plan, you might be tempted to cash in some of whatever investments you have. One big problem with that though: the stock and bond markets are likely to drop precipitously. So, if like most people, your money is tied up in mutual funds for stocks and/or bonds you’d be seriously depleting your savings because you would be selling at a loss. What’s more, if you are disabled and receiving SSDI, any money taken out of your IRA or 401-K could be hit with a significant tax penalty for making early withdrawals. So consider those funds a last resort.
2. Home Equity Loans. If you have a home, you might consider taking out a home equity loan. Problem is, if you don’t already have an existing home equity line, there is no assurance your bank would grant you one. And in any event, many of you my have no equity in your homes, or you may have already lost your home to foreclosure. Still, this might be a possibility for a few people. Just remember though that you have to pay back that loan with interest, and who knows what the interest rates are going to look like after Aug 2nd rolls around.
3. Life Insurance. Do you have whole life insurance policy (i.e., one that has cash value in it)? Well for those of you who do, you have two options: a) cash in all or a part of your policy, or b) take out a loan against your policy. Most whole life policies allow both options. However, if you cash in your policy, the proceeds will be taxed as ordinary income to you and your heirs would receive less money (or none at all if you cash out the policy entirely). As for taking out a loan, you will have to pay that loan back with interest also, usually at a designated interest rate. Still, might be something to consider if you have whole life insurance.
Well so much for the people who have savings or the means to take out a loan. What if you don’t have those options available to you? Well, here’s a few more thoughts.
4. Luxuries. Cancel any “luxury” items. What do I mean by that term? Well, here’s a few things that you don’t absolutely have to have if your check stops coming:
- Basic Cable or Satellite TV (just make sure there is no cancellation fee)
- Cell phones (same qualification re: cancellation fees).
- The Internet (check for cancellation fees though)
- Newspaper and magazine subscriptions
- Eating out (includes, fast food, takeout or pizza delivery)
- New Clothes
- Fresh Food (you can live on generic oatmeal, pasta and canned veggies)
- New Books, DVD’s, CD’s, Video games, etc. (go to your local library instead)
No doubt you can think of a few more.
5. Electrical Usage. Eliminate all but essential uses of electricity. Turn off your lights, unplug unused devices, hand wash dishes, eat more cold meals (welcome back PB&J sandwiches), don’t wash clothes as often, and unless you must need your ac or fans to survive, don’t run them. If you do (and sadly that accounts for a lot of people during this current heat wave) run the ac at the highest temperature setting you can endure (80 degrees F?) without falling victim to heat stroke.
6. Food. I’ve already mentioned food a lot, but let’s get down to the nitty-gritty. Don’t buy bottled water, soda, sports drinks, juices, milk or pre-made tea. Tap water is your friend. Buy only generic items. Generic cereal, generic yogurt, generic toilet paper, etc. Check with your local food bank to see if you qualify for their assistance. I’ll bet a lot of you will. Buy day old bread, bagels etc. Much cheaper. Oh and no candy bars. No beer, wine or other alcohol. Obviously, if you are a diabetic you have to maintain your blood sugar levels so I’d chat with your doctor about what food you should have and what you can do without.
7. Family. You have any well off children or other relatives? If so, give them a call and ask for help. It may be demeaning, you may feel ashamed, but remember it is better to swallow a little pride than starve. After all, you paid into social security for many years and it would be the government that would be taking away the money due you. It would not be your fault if the Republicans in the House can’t get their act together.
8. Sell Some Stuff. Now might be a good time to de-clutter your home. Hold a garage sale. Sell your second car or second TV if you have one. Are you on e-bay? Might be a good time to sell anything of value that you can live without. Real silverware, for example. Expensive fur coats (yes, some people do have them). Do you have a lot of jewelry you never wear? See if anyone would be interested in buying it, and as for gold, well, if you have gold chains, diamonds or other jewels find the jewelry store in town that’s paying the highest price for such items and take the bus to their store. Why take the bus? Well that leads me to my next idea …
9. Drive Your Car as Little as Possible. Gasoline is expensive. If you can, arrange car-pools for grocery shopping with your neighbors and friends. More importantly, check out your public transport options: Buses, light rail, whatever. Maybe there is an inexpensive bus line near your home that runs to all the places you have to go.
10. Medications. Hopefully, Medicare payments won’t be cut off. Yet, even if they aren’t, you should find out from your doctor which drugs you can go without for a month or so, because even with Medicare you still have a make co-pay for your prescriptions. Also ask if your doctor has any samples of meds you take that he obtained from drug manufacturers, and ask if he can provide you some. Never hurts to ask.
So that’s a few ideas to consider should the worst come to worst, i.e., no debt ceiling compromise bill is passed by August 2nd and the federal government “defers” payments of your SSI or SSDI checks. I’m sure you can think of many other, possibly better ideas, to help get you through the loss of your social security income. The most important thing, though, is to have a plan in place, as soon as possible. Don’t wait until the last minute to see if the House Republicans cave and make a deal with Obama, the Senate and House Democrats. By that time it may be too late.
Good post Steven D.
We are beginning to hunker down, knowing that we will be missing some critical bill payments if the worse comes to pass. And knowing that my wife’s retail job might drop well below the 30 hours every two weeks that it is now.
For those not caught up in this and who have resources, here are the things that might help us make it through this:
Downsized to a 1600 sq.ft. townhouse years ago. If you are able to buy in this market move in that direction–low payments and low energy cost.
Over-insulated it and got high-quality thermal windows. We can now heat it in winter with two to three circulating oil space heaters and an electric blanket. We heat specific rooms. The house drops to 50 degrees on the worst days (10 – 20 outside). Summer cooling is a single $75 (end of year sale) window air conditioner. Outside right now it is 97. Inside in the hottest room, it is 82, which is tolerable once you get used to it. And we insulated the water heater–well, with taped edges.
CFLs everywhere. Immediately cut 25% off my electric bill.
Use the microwave more; gourmet cooking less. A crockpot does maybe 8-12 servings on little electricity. A historic air-blown popcorn popper pops inexpensive snacks.
A reliable car that a shade tree mechanic can repair is more important than a loaded car that only a dealer can repair. We have built a relationship with a local independent garage that does excellent work for substantially less than what a dealer’s service department charges. If the car is out of warranty, you don’t need the dealer. If ZipCar, rental car for long trips, and public transit make sense to your cash flow, do it.
A community with active neighbors is more important than one with “your dream home”. We bought out townhouse when there was a panic about school reassignments. We lived through a minor crime wave and participated in the community watch effort that brought it under control. The community has its own Christmas and Fourth of July parades. People garden ans share produce. Dog sit (and cat sit) for each other. Even in the midst of working two or three jobs.
My other insights (don’t laugh, they’re not original):
aged accounts payable
pay within 90 days
pay the vendor not the collection agency (and know what their phone numbers on caller ID are – hint: “private caller” no number; also make sure to pay in full as soon as you can–don’t stiff them
Find out if your state has a homestead exemption under bankruptcy, find out what it is for folks and for folks over 65. In NC it is generally $35,000 but goes up to $60,000 for folks over 65.
I think we are about to go through a bit of a rough patch.
Mrs. ID & I have been trading our services for other services (auto repair, etc.) & food for many years. It works well for us and has the bonus effect of keeping commerce local.
In some towns, like Ithaca NY, folks have created their own scrip just for this purpose. It is tied to the US dollar, but the payments cannot circulate easily outside of town. It bridges the gap between barter and a money economy.
steven, fyi; withdrawals from an ira, both roth and conventional, may be taken sans penalty after age 59 1/2. additionally, penalties do not apply if any of the following conditions apply:
Occur because of the IRA owner’s disability.
Occur because of the IRA owner’s death.
Are a series of “substantially equal periodic payments” made over the life expectancy of the IRA owner.
Are used to pay for unreimbursed medical expenses that exceed 7 1/2% of adjusted gross income (AGI).
Are used to pay medical insurance premiums after the IRA owner has received unemployment compensation for more than 12 weeks.
Are used to pay the costs of a first-time home purchase (subject to a lifetime limit of $10,000).
Are used to pay for the qualified expenses of higher education for the IRA owner and/or eligible family members.
Are used to pay back taxes because of an Internal Revenue Service levy placed against the IRA.
they would only be subject to taxation as ordinary income…unless it’s from a roth ira…which is unlikely to be a problem for the people this is addressed to, assuming the “people who rely heavily on their SSI or SSDI check from the government to pay the bills, buy food, etc.” are fortunate enough to even have one.
Thanks
Thanks for the detailed information. I’m on SSDI, have had to withdraw money from my 401K-now-IRA for living expenses, and check the Disability box on the withdrawal application. (I know it’s not a good idea to withdraw money from retirement savings, but my SSDI is the sole income for our family of four, our 11-year-old automobile is reaching the end of its life, and I’m in the Medicare donut hole for my prescriptions. And there have been no COLAs on Social Security the past two years despite the rising prices of groceries, etc.)
The other conditions you list for withdrawing money penalty-free I was not aware of. Again, thanks for the information.
Best go with frozen veggies than canned. 1) less salt & 2) more vitamins! If you’re just doing carbs (pasta oats etc), you really want nutrition.
.
Too bad your name is in error and one link is wrong …
"But I will not let myself be reduced to silence."After reading your article on what should we do if Social Security checks are stopped, I felt a very big need to make a few comments of my own. Not just for me, but on behalf of anyone in the United States that understands where I am coming from.
First let me start by saying that not everyone is receiving a Social Security check just as supplemental income , as it is apparent that you seem to think this way according to the “helpful hints” that you have provided in your article on how to make it without a check. Believe it or not, some of us out here are actually living totally off of that check. This includes retired workers, as well as disabled Americans.
The following are some of the issues that I have with your suggestions:
As for suggestions 1 – 3, you need to realize that most people on SSDI, do not have an IRA or 401 K . Why? Because if we did have one, while we were waiting on the 30 days to 3 or 4 years or more for Social Security to approve our disability, we actually had to cash it in and use it to live off of. Believe it or not, most people are denied the first time for disability, and it takes an attorney and at least one more try, which is a 3 to 4 year wait to get your day in court, before you finally get it.
Now for suggestion 4, Luxuries:
Maybe you just do not understand, but for those of us that are living solely off of our SS check, we have already taken every luxury away. Such as:
Cell phone? Most of us get the government issued cell phones for poor people, that have a limited amount of minutes on them because they are for emergency use, to call 911, etc. For some of us, it is the only phone we have.
We are extremely lucky if we have the internet or any kind of subscriptions to the house. We very rarely ever eat out in the first place and new clothes? We have been buying needed clothes at the second hand clothing stores ( Yes those clothes that you donate out of the kindness of your heart, well they are not given out to many.. they are resold in thrift stores by most of the very same charities that you gave them too.) Believe it or not these clothes are sometimes too expensive to purchase as well. We literally wear our clothing until it is so ragged it falls off., or our children grow out of things and pass them down to the next. New clothing.. what a joke.
Fresh food. Now this I really have to laugh at, as most of us are receiving food stamps and are already living off the cheapest thing possible, which is what you just mentioned. Actually, a good deal of the nation, check or no check, is living off of this right now as they cannot afford to buy anything else. I would love to see you eat Ramen for dinner every night of the week. Believe me, it sucks. As well, you must not be an advocate for a healthy America and trying to stop obesity, because the foods that you just recommended are what are contributing to making the nation overweight.
I am just going to roll my eyes at new books, DVD’s, CD’s and Video games, as we have already been using the local library for a long damn time.
Number 5. Electrical Usage. Once again, we are already eating as cheap as possible If we are able to buy the ingredents for a hotmeal, by god don’t we deserve one? Besides, it takes just as much Electricity to run the fridge as it does to run an oven for a few mins. Cutting off the AC and running fans. Ummmm have you not been keeping up with the local weather reports? The nation has had a HUGE heat wave, one of the largest in U.S. History. Of course we are using them to survive! What concerns me even more about what you just said, is what if some elderly person takes your advice and shuts them off, thinking, Ohhhh I can survive? Because believe it or not there is going to be a few stubborn people that will try it and die of heat stroke anyways.
And 10: Did you really suggest that people go ask their doc what meds are not needed? Most doctors put a patient on medications because they are needed. I can see it now “Hmm doc, can I cut out my Blood Pressure meds, my insulin, or better yet which anti psychotic pill can I stop?” “Do you really think that dialysis is needed?”. Or how about ” Doc, are you really prescribing me things I dont need to take?” What doc is not going to be offended by that, or burst out laughing thinking that you have lost it? Oh but wait, you said if Medicare is cut out. “Knock Knock, are you there?” Most can barely afford to go to the doc with Medicare. How do you suggest they go without it? Are you footing the bill? Cause if so, I need your contact information. I have at least four family members that I can think of right off the top of my head that depend on their Medicare. As for stopping medications, a lot are going to be stopping much needed ones. Why? Well that leads me to the last statement.
Most of us are living COMPLETELY off of our Social Security checks. If it stops coming in, we are going to be homeless and living in a shelter, not qualifying for Medicaid because there is no program out there for us since some of us no longer have children and can’t get pregnant.
Please, wake up and open your eyes.