By: Jen Smith
Are you about to retire and worried about how you will manage expenses during your golden years? You need to know your income might reduce after retirement!
As we review retirement it is important to be considering your expenses. Americans aren’t saving enough for retirement. Study after study reports the same findings. For example, a study released by theGovernment Accountability Office in 2019 found that 48% of Americans have no retirement savings whatsoever. It is key to put in place retirement strategies that make sense for you.
Expenses You Should Start to Eliminate for Retirement
Before we talk about what can go down, let’s talk about what can go up. Those include:
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Healthcare expenses
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You will have lots of free time, so you may decide to travel more.
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You will also have more time to shop.
Therefore, you need to reduce your expenses a bit before retirement so that you can enjoy your golden days without having to compromise that enjoyment. This will help you to spend on the things you value more.
A few years back, a query came in the DebtCC Forums on how to reduce expenses at retirement. A person asked for help on how he can reduce expenses and have more money in hand in his golden days.
Here I am jotting down some of the things that we discussed and the forum member followed to save money like a pro at retirement.
Trim your lifestyle a bit
Certain expenses you can cut down to enjoy more after retirement. For example, you can do without branded attire all the time. If you’re not doing a regular job, then you won’t have to purchase lots of formal attire; you can just keep a few for certain occasions. Keeping expensive attire means to spend more on dry cleaning and maintaining them properly.
Instead, you can purchase casual attire which you feel comfortable to wear and can maintain easily.
Plan a realistic budget
At retirement, it is necessary to have a look at your budget and modify it. Look for certain expenses that you can do without. Cancel your gym membership if you’re not a regular visitor. Likewise, opt-out of any magazine subscriptions if not needed.
You can very well browse the internet to gather your required information. Also, taking a walk outside at your nearby park is a better alternative than paying for expensive gym memberships if you’re not a fitness freak.
To plan a budget you can follow the same strategy; that is, saving a certain portion of what you’re getting monthly. It is a good practice since you don’t know how long you will live and you want to enjoy life stress-free.
It is advisable not to use your emergency funds since you can tackle sudden expenses with it. You can plan a frugal budget and manage your expenses without having to worry about finances.
While planning your budget, include vacation expenses, say about, twice or thrice a year, and include it in your monthly budget. It will help you save the amount with ease.
Downsize your home and car
Do you like to keep a big home after retirement? Most likely, your children have shifted to their own houses, so you don’t need a big home. Also, a bigger house means it is difficult to maintain and to shell out more for maintenance. So, it is wise to move to a smaller house.
You can also rent a portion of your house or garage and earn extra money every month.
Likewise, you can just keep one car and sell the second vehicle to reduce maintenance costs. Also, plan your trips together with your spouse to reduce fuel costs, too. If you need to purchase a car, you can buy a used vehicle in good condition.
Opt for senior discounts
Even if you decide to travel more after retirement, don’t forget to ask for senior discounts while reserving a hotel or a rental car. You may also qualify for discounts at grocery shops and restaurants.
However, carry your IDs all the time since you may need to show your card sometimes. The forum member I was talking about, once had to produce his identity card in a hotel for a senior discount since he looked younger than his age.
Assess your insurance coverage
Depending on what vehicle you’re driving, you can reduce the insurance cost of your vehicle. For example, you can reduce coverage if you’re driving an old car.
You can also talk to your insurance agent and opt for an objective assessment of the coverage amount of your life insurance policy.
Regarding home insurance coverage, your premium amount will reduce if you opt for a smaller home. Also, install anti-theft devices to reduce insurance costs.
The cost of an insurance premium for a house is relatively higher in certain areas such as flood-prone areas. Therefore, if you’re purchasing a home, you can select one keeping these things in mind. Also, you can move to a more tax-friendly state after retirement.
Take a look at your tax bracket
You may fall into a lower tax bracket after you retire. Check out tax breaks for people aged 65 years or more. Also, carefully time your retirement withdrawals to reduce your tax burden. If required, talk to a personal financial advisor to gather knowledge and take the required steps to reduce the payable tax amount.
Get rid of annoying debts
Retiring with debts is an absolute no-no. Therefore, if you have debts and your retirement time is approaching, tackle your debts head-on.
As I said earlier, the person whom I helped once through DebtCC Forums, was about to retire with debt. After a few discussions, he opted for debt settlement as his most suitable debt elimination plan since he was not able to repay dues in full. He did not have any plan to take out a loan at that time so he didn’t worry about a dip in credit score.
With the help of a credit card debt settlement, he could get rid of credit card debts before his retirement. In doing so, he was able to save a significant amount every month. And, with time, his credit score also increased after reducing his debt burden.
It is also advisable to pay off your mortgage loan before you retire. It also feels good when you live in a mortgage-free house; that is, you own the property completely.
Some quick tips for saving a significant amount after retirement
It always helps if you can increase income and not concentrate on just reducing your expenses. Here are a few tips to increase income after retirement.
Draw social security funds after 70: Every year you delay taking out your social security funds, your benefits get increased by about 8%. So, calculate how much you can gain if you draw funds at 70.
Try to earn extra if possible: If your health permits, you can do a part-time job and earn extra. Choose a job you love to do. For example, you can offer online tuitions or start blogging. Or simply, you can browse through the internet and complete a survey or review a website and earn a few dollars. It will keep you engaged and you can enjoy doing a bit of work along with earning, too.
So, do you agree that retirement is the best time to enjoy life? Yes! So, embrace it happily. Lead life on your terms and enjoy it!
This article originally appeared on Modern Frugality.
Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.
