It Can be Tough to Stretch Social Security Over a Month

Social Security reduces poverty, stabilizes household finances, and can even support a beneficiary’s extended family. But drill down to a single month in the life of a low-income retiree or someone on Social Security disability, and a picture of hardship comes through.

Researcher Madelaine L’Esperance at the University of Alabama found that financial problems build as the days pass since the last Social Security check.

Over the course of a month, she said, recipients “were more likely to experience a financial shortfall as the pay cycle progressed.” The shortfalls occurred on the days when their spending, as reported in a daily diary, sharply reduced or depleted their cash on hand.

Making ends meet can be very challenging for low-income people who largely rely on Social Security and have very few or no other sources of income. L’Esperance’s analysis of the information about specific categories of spending indicates that people struggle the most to pay for the ongoing cost of groceries, utilities, or transportation to work.

This study isn’t the first to explore the problems that can arise from the timing of Social Security benefits.

For example, the agency uses a retiree’s birth date to determine when to deposit monthly checks in an account. A different study showed that retirees who receive their checks late in the month, right before the rent or mortgage is due, are in better shape financially because they pay that off before they run out of funds. But people who get the checks early in the month and spend the money down are more likely to resort to a payday loan to pay the big-ticket housing expense that is due later.

The problems caused by running out of money can snowball. Paying a fine or interest on a late payment or taking out a payday loan only makes it harder to get through the next month.

To read this study by Madelaine L’Esperance, see “Effects of Income Payment Timing on Financial Shortfalls for Retirees and People with Disabilities.”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.