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Social Security: How To Not Pay Bills With Your Benefits Check

Thomas-RoodAuthor Thomas Rood has devised an investment system that frees your Social Security check to do with what you please.

Thomas Rood says older Americans shouldn’t have to rely on their monthly Social Security benefits to pay their bills once they Thomas-Rood-Paycheck-Independence-Dayretire. Rood, the author of Paycheck Independence Day: Learn How to Use Your Paycheck to Stop Needing a Paycheck, says you don’t need to be a Wall Street wizard or start a business. Money management is the key for not running out of money during retirement, he says.

The 57-year-old software engineer based in San Francisco says it’s not too late for those still working to use their existing paychecks to pay their monthly bills for the rest of their life. That would free up baby boomers to use their Social Security and other retirement funds for what they please.

When you manage your money, you no longer need a paycheck to pay your bills, you need less retirement money and Social Security is just what it’s called—it’s security,” Rood says. “People now you use their paycheck to pay their bills and when they retire and don’t have a paycheck anymore, their retirement fund has to take over paying their bills. That’s the model that everybody follows, and I think it’s the wrong one.”

Rood says it’s not too late to start in your 50s. It only takes 10 to 15 years before people no longer need a paycheck to pay their bills. That means people can use their retirement funds simply to cover food, taxes and other expenses, he says.

Rood encourages people to make a list of your bills and next to each one, write the annual amount of the bill rather than the monthly amount. There are two categories of bills—lifelong bills and temporary bills, he says.

Lifelong bills that you have for the rest of your life—gas, electricity, water, trash and phone—should be paid with investment income from your paycheck, Rood says.

Rood says he invests in dividend-paying stocks.

You can find them in the four and five percent range anytime, anywhere,” Rood says. “There are plenty of them. I own about 30 stocks that pay four or five percent dividends. The nice thing about these stocks is I bought one that was paying $1.28 a share for $2,300 for 100 shares, and I was getting a 5.5 percent return on this. The same stock’s dividend is now $1.84 a share. That $2,300 investment is now bringing me an 8 percent return on it. Even better, I got to use the dividend along the way to pay bills so I no longer had to do it out of my paycheck.

Rood says the first bill he eliminated was his trash pickup. It was about $200 a year and at 5 percent return on investment, Rood says he needed to invest $4,000 to stop paying that bill out of his paycheck. He saved $1,000 a month for four months and eliminated paying that bill and kept doing it for the rest of his bills as well. Rood says even those making $50,000 a year wouldn’t have a problem making the system work.

Everybody, believe it or not, even people living paycheck to paycheck have $500 a month more than what they have spend,” Rood says. “That’s the minimum to get started. With $500, you can do that in 15 years. Even if you don’t get them all done by the time you retire, let’s say you got 10 bills and you only get seven of them done, that’s seven less bills you got to cover with your retirement money. That right away puts you in a big advantage of where you would have been had you not started doing this at all.”

Rood says he’s not an investment advisor and doesn’t tell people what stocks they should pick. Instead, he encourages people to find an investment advisor if they’re unable do it themselves. Rood says some of the stocks he owns are companies he has to pay monthly bills to anyway.

It’s kind of funny but I tell people that if a company is going to send you a bill, they should send you the money to pay that bill,” Rood says. “My landline is paid by dividends from AT&T. AT&T pays for my cell phone. My trash pickup is paid for by stock dividends from Waste Management. Exxon-Mobil pays for our gasoline. Not every company has a dividend-paying stock that you would want to buy or even have one at all. So it doesn’t have to be that company. I have two real estate related stocks that I combine to pay my water bill.”

Rood says he started his system in 2004 to deal with his own money management problems. Just like he developed software, he developed his bill-paying system, and his wife Oksana suggested he write a book to let people know what he did.

Rood says he and his wife, 45, had their first child last year and haven’t had to worry about money since he implemented his system. Even when the recession hit in 2008 and he would go as long as a year without getting software work, Rood says he was fine financially even when friends went through foreclosures or bankruptcies.

I have friends tell me they will work the rest of their lives because they can’t afford to retire,” Rood says. “And for those who have to sell their retirement funds every year to cover bills, it becomes a race. I don’t want to wake up one day when I’m 80 and see I hope I die this year because I’m running out of money.”

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