Retirement is one of the most exciting times in a person’s life, but it can also be a time of financial stress. Some retirees may find themselves faced with having to reduce their expenses to make ends meet, manage health care and health insurance costs and preserve their retirement savings. If you fall into this category, the good news is there are plenty of strategies to help keep your costs low while you enjoy your retirement years. Here are some steps you can take to cut costs and reduce your overall household spending to maintain the retirement lifestyle you desire.
Downsize Your Home
One of the most significant retirement expenses is your mortgage payment. You may have had a larger house to accommodate your children, but you’ll likely be an empty nester when you retire and have extra space in your home. Consider downsizing and moving into a smaller space that better suits your needs.
Alternatively, if you live in an area with a high cost of living, consider relocating to somewhere with lower housing costs—such as the suburbs or even another city or state. This can help you save on rent or mortgage payments while providing comfortable accommodations in a safe neighborhood. These efforts may also help you save on homeowners insurance.
Save on Taxes by Moving
Relocating to a different state is not only a way to save on housing costs but may also save you a lot of money in taxes. This is because each state has its tax laws, including different tax rates for retirees and different rules for Social Security benefits. For example, some states don’t tax Social Security benefits at all, while other states have very high tax rates on Social Security benefits.
Similarly, some cities in the US require income tax to be paid by their residents, such as New York City, Detroit, and Philadelphia. Do your research ahead of time and consider moving to a state or city with lower taxes if possible. Another option is to consider moving into an area with lower property values and/or property taxes, such as rural areas or small towns where the cost of living is lower than in big cities or suburbs.
Reduce Your Utility Costs
Utility bills can add up quickly if not managed properly, so it’s important to reduce these costs during retirement. Investing in energy-efficient appliances such as washing machines and air conditioners can help reduce electricity bills over time. Additionally, replacing old windows and doors with more energy-efficient models can also help bring those utility costs down significantly. Installing programmable thermostats throughout your home is also an option, so you only heat or cool the rooms that require it at any time. This will also help reduce electricity usage and bills overall.
Depending on where you live, some utility companies also offer budgeting programs for retirees and those with lower incomes. Call or research the utility company sites to see what they offer.
Start Budgeting on Groceries and Other Items
Another great way to save money during retirement is by budgeting for groceries and other expenses like toiletries and cleaning supplies. Creating a grocery list ahead of time helps you plan out exactly what items are needed each week—this way, you can avoid purchasing unnecessary items at the store. Believe it or not, studies have also shown that shopping hungry can increase your desire to spend money not only on food but also on material items. Following these tips can help you keep your grocery bills low while still providing all the essentials for each week.
Smart Spending During Retirement
In conjunction with budgeting, it pays off to shop wisely to take advantage of discounts whenever possible. This includes using coupons when grocery shopping or using discounts on travel packages. You may also want to look into senior discounts, loyalty programs or rewards cards at local stores where you frequently shop—these can often lead to great deals over time. And don’t forget about bulk-buying items such as toiletries and household supplies—buying larger quantities can often save money in the long run.
Maximize Retirement Accounts
Make sure you take advantage of all available retirement accounts such as 401(k)s, IRAs, and Roth IRAs when saving for retirement. These accounts can help you save more money for retirement without paying taxes on your earnings until you withdraw them during retirement. Also, many employers offer matching contributions up to a certain percentage which can be an added incentive for contributing more towards your savings account during retirement planning years.
Additionally, make sure you invest wisely by diversifying your investments and not taking unnecessary risks with your money. This helps you to increase your opportunity to maximize returns while minimizing risk over the long term. The hope is that this strategy will not only help to grow but preserve the size of your nest egg.
Purge Unnecessary Subscriptions and Services
Eliminating unnecessary subscriptions or services you don’t use regularly is another easy way to save money in retirement. This may include cable television, gym memberships, magazine subscriptions, streaming services, etc. If you can live without these luxuries for the time being, it can help free up some extra cash each month that can be put toward other retirement expenses. You may be surprised at the cost savings you can experience by streamlining your monthly payments and financial commitments.
Cut Back on Eating Out
We all love a date night with our significant other or a nice meal with friends, but eating out regularly can add up quickly. It helps to set limits on how often you spend money on eating out each month. If possible, try cooking meals at home more often—it’s usually much cheaper than dining out and can be healthier too.
Plus, it’s an enjoyable activity that gives retirees something fun and productive to do with their free time. If you do decide to treat yourself by going out occasionally, consider choosing restaurants with senior discounts, early bird specials or using lunch menus instead of dinner menus–you’ll get the same delicious food without paying full price.
Cash Back Credit Cards
Cash-back credit cards can help holders unlock the benefits of using plastic instead of cash for everyday purchases. If used responsibly, these cards can provide significant savings over time without sacrificing anything in return—other than making sure you pay off your balance in full each month. You could also use these credits as additional income or apply them towards vacation expenses if you decide to travel somewhere special.
Additionally, many credit card companies offer additional bonuses and incentives like free flights and discounts at partner retailers that make cash back even sweeter. The important thing to remember is to remember to pay your balance each month so you don’t incur an interest payment and to be mindful of any annual fee for using the card.
Downsize Your Car
Many people enjoy driving a fancy car, especially when they’ve reached a point where they can afford it. However, another way to save money in retirement is to reduce transportation costs and invest in an inexpensive and fuel-efficient car. These types of cars can provide you with the functionality you need while also reducing your costs in gas and maintenance fees.
Bonus: Make Extra Cash with a Side Hustle
A side hustle is any work you do to make extra money. It could be anything from starting an online store on Etsy, becoming an Uber driver, teaching English classes, doing freelance writing or design work, or finding a way to make money off any hobbies you enjoy. One of the great benefits of a side hustle is you control how often and how much you work.
With this sort of flexibility, you can not only enjoy the fruits of retirement but make money on the side without feeling like you’re back at your full-time job. What’s more, this additional stream of retirement income helps protect against financial hardship, fights boredom through creative freedom and personal growth, and can provide peace of mind knowing that you are supplementing your savings with more money via a revenue stream.
The Bottom Line
Retirement is an exciting time for people who have worked hard for many years—but it can also bring about financial stress due to impending retirement costs with limited income sources. Fortunately, there are several strategies that retirees can use to reduce expenses while on a fixed income during this stage of life. By taking advantage of the simple tips above and being financially efficient, you can ensure that your golden years are comfortable without worrying about depleting your retirement savings.
For those nearing retirement age, now is the time to start planning so you can start saving and reducing expenses later down the road. You can also consider becoming a member of Planning Made Simple. Members of this community not only have exclusive access to retirement planning resources but are also paired with a financial coach with years of experience in the industry. Your Planning Made Simple coach can not only perform a complimentary evaluation to ensure their retirement plan is on track but help to answer your questions and provide guidance along the way.