I Will Receive $710/Month from Social Security, What Should I do With It?

When we think about Social Security payouts, our minds are immediately drawn to how retirees should spend the money. Whether it’s used to live on or as part of an overall income alongside a 401(k), it’s all about enjoying retirement. 

Sadly, while retirees get much of the attention as Social Security recipients, it isn’t always the case that they are the only ones receiving money. This is something this 15-year-old Redditor is learning as they are set to receive monthly payments after the passing of a parent. 

Getting Ready to Receive Social Security Payments

Posting in r/personalfinance, this Redditor is in a unique position as they are going to start receiving Social Security money as a result of a parent’s death. According to their post, they are receiving approximately $710 per month, which should total around $25,000 by the time they graduate high school and turn 18. 

For many high school students, $710 is a lot of money and far more than they might make per month working part-time at a local grocery store on the weekends. In other words, this money is as much of a windfall as a larger amount would be to an adult. 

The issue is, we don’t know if these payments will continue beyond the high schooler’s 18th birthday. If they stay on as a student and start a freshman year of college, they could earn another year’s worth of payouts, or $8,520, according to Social Security Admin rules that enable survivor benefits to continue until age 19 as long as the individual remains a student. 

Regardless of how much money this Redditor receives, the big question is what to do next. They are unsure how to handle all the money as they receive it, or after they have received all the available payments in total. 

Social Security Rules 

One thing the Redditor makes super clear, as there is a lot of this misjudging in this post, is that they must live in a broken home or with a family that desperately needs this money. On the contrary, the original poster indicates that it isn’t the case at all, and they will be able to put all of this money aside or spend it all at once on video games. 

What we actually have is an individual who, at 15, already has a good head on their shoulders financially. The lone caveat here is that the Social Security Administration has specific rules governing the use of this money. As a minor, this Redditor, receiving this money as a survivor benefit, can use this money for savings or investments. 

However, because the payee is a minor, the Social Security Administration will require someone else, such as another parent or guardian, to manage the money. This person should use the money to pay for essentials like food or housing that the individual needs first. If the money doesn’t need to be used for this reason, which appears to be the case, then the money can be put into an interest-bearing account or a US savings bond in the minor’s name. 

Put Everything Away for a Rainy Day

While I am not a financial advisor, and this Redditor might want to speak to someone who is, I know what I would tell a younger sibling if this were happening to us. The best scenario would be to put this money into a high-yield savings account for now and set it aside for future expenses. The Redditor can call it a rainy day fund, but the money should continue to grow even as more funds are coming in over the next 3-4 years. Currently, high-yield savings accounts offer interest rates between 3.5% and 4.30%, which may not be a substantial amount, but it’s not insignificant either. 

For argument’s sake, let’s say the Redditor invests all $25,000 in an account on the day they turn 18 and makes 3% interest. This is lower than what is currently being offered, but let’s assume interest rates fall over the next few years. If the money is set aside and untouched for 20 years, by the time this Redditor turns 38, they will have $77,838 or a profit of $52,838. This is a strong return, but it should also serve as a reminder that this individual should explore other financial resources to understand how to manage Social Security income best, specifically, or consider consulting a qualified fiduciary financial advisor. 

The post I Will Receive $710/Month from Social Security, What Should I do With It? appeared first on 24/7 Wall St..