Social Security is the lifeblood of America’s retirement system. More than 41 million retired workers in the U.S. receive a Social Security check each month, which averages $1,360, according to the Social Security Administration (SSA). For the typical senior, Social Security makes up just over one-third of income in retirement.

If your Social Security check makes up a large portion of your income, it’s important to spend it wisely. Read on for smart suggestions about how to spend your Social Security benefits and to make sure you don’t squander your Social Security funds.

Choose Medical Insurance Wisely

Healthcare isn’t an expense you want to skimp on during your golden years. Although you’re probably on Medicare, there are still ways to save money. Review your coverage to make sure you’re getting the best value.

John Barnes, a certified financial planner and insurance agent with Andover, Mass.-based My Family Life Insurance, said you must have the right Medicare and Part D plans. Choosing a PPO plan typically allows you to see a wider variety of doctors without seeking a referral from your primary care physician. However, these types of plans have a higher cost and higher copays for out-of-network doctors.

With an HMO, your costs will be lower, but you will have fewer options for doctors. Nevertheless, if all your doctors are in the HMO, you can save money by choosing this type of plan.

Purchase Identity Protection

According to the credit reporting agency Experian, 2.6 million seniors fall victim to identity theft each year. Thieves target seniors because they are often not as tech-savvy as other potential victims.

Consider spending some of your Social Security check on measures to protect yourself. For example, purchase a shredder to destroy documents that contain sensitive information. You can also sign up for an identity theft protection service to monitor your activity so that you don’t fall victim to scams that could leave you with an empty bank account.

Shop Around for Car and Home Insurance

You can stretch your Social Security dollars by getting the best rates on your homeowners and car insurance. Shopping around might land you discounts your current company does not offer.

Even better, just calling your current company and telling it you’re considering switching might result in your rates dropping. “Many times, insurance companies will miraculously find a discount they forgot about or just became available if you tell them you’re shopping around,” according to Joseph Roseman, managing partner of wealth management firm O’Dell, Winkfield, Roseman and Shipp in Charlotte, N.C.

Withhold Benefits for Taxes

Not even Social Security benefits are safe from the clutches of the Internal Revenue Service. Depending on how much income you make from other sources, you could pay taxes on up to 85 percent of your Social Security benefits.

Having money withheld during the year allows you to avoid a surprise bill at tax time. Use IRS Form W-4V to set your federal income tax withholding rate at 7 percent, 10 percent, 15 percent or 25 percent of your monthly benefit, depending on how much tax you expect to owe.

Make Your Home User-Friendly
If you plan to stay in your home for a long time, consider spending some of your Social Security benefits on improvements that make it easier and safer for you to live there. These projects could include:

  • Placing grab bars in your shower
  • Lowering counters if you need to use a wheelchair
  • Adding better lighting for your hallways or yard
  • Installing handrails for your stairs

Although a grab bar or seat in the shower might not sound like as much fun as splurging on a nice dinner with your grandchildren, think how much money — and pain — you’ll save by avoiding a trip to the hospital.

Take a Defensive-Driving Class

Even if you think you’re still a fantastic driver, consider taking a defensive-driving class. You might not realize how much your reflexes or vision have declined over time. Seniors are at a higher risk of serious car accidents than any other age group except those under 25, according to AAA.

You might be able to recoup the money you spend on the class — or even more — if your car insurance company gives you a discount for taking such training.

Invest for the Future

Even if you’re retired, that doesn’t mean you must stop saving for the future. The life expectancy of a 65-year-old is 20 more years, according to the SSA. That’s a long time for your money to continue to grow. So, try to curb your fear of risk and invest some money for the future.

“Depending on your risk tolerance and your age, it could be prudent to place some of this money into equities to curb inflation effects,” said Barnes. “Conversely, a conservative annuity or fixed-income securities could work as well, depending on your risk tolerance and age.”

Plan Your Financial Legacy

If you have leftover money from your Social Security check, you can make a difference for generations to come by allocating that cash wisely. “If legacy planning is important to you, and you are generally healthy, you could set up life insurance policies on yourself for your beneficiaries,” Barnes said.

He added that using a 529 plan to save money for the future education costs of your descendants is “an often-overlooked legacy planning vehicle.” This money can grow tax-free until it’s needed for your grandchildren, and then be distributed tax-free for qualifying education costs.