So, you have likely already worried about saving money FOR retirement. And, now it is time to worry about saving money – or reducing your expenses – in retirement.
When living on a fixed income in retirement, it is very important to make sure that your income does not exceed expenses. Living more frugally can be done no matter your income bracket. And while the idea of a more modest lifestyle may not appeal to you, it may be necessary – and not as bad as you had expected.
Here are a few tips for managing your budget:
Do Not Jeopardize Your Health
Too many seniors are genuinely struggling to make ends meet. A survey by the Senior Citizens League (TSCL) found that 42 percent of seniors had either postponed filling their medication or were taking a smaller dosage than prescribed. This no longer as prevelant, thanks to the institution of Medicare Part D, but is still occurring.
While prescription drugs can be incredibly expensive, it is not safe to alter your prescriptions without the guidance of a doctor.
If you are having a hard time paying for prescription drugs, you may want to explore alternate prescription drug coverage. Consult with an insurer about Medicare supplemental plans that might help you.
Understand Your Budget
In order to reduce expenses, it is best to get a very clear understanding of exactly how you are spending your money. Try keeping a record -- in a notebook, a spreadsheet, a software program or on your phone – of EVERY dollar you spend. Many people are surprised to learn how much little things add up over the course of a month.
When living in retirement on a fixed-income, you will not have more money tomorrow to pay off the debt than you do today. It is usually best to eliminate any debt as fast as possible to save money.
- The average person retiring today carries over $6,000 in high interest credit card debt into retirement. Paying just the minimum payment will consume a total of over $22,000 over a period of 20 years.
- By comparison, a person taking advantage of debt consolidation could pay off the same debt, with same monthly payments in just 6 years and with a total of only $6,760.
Reducing your debt represents a huge opportunity to reduce your expenses in the long run.
- If you have savings, you might consider using those assets to pay off your debt.
- Refinancing your mortgage is another way to access cash – as well as reduce monthly payments.
Can You Eliminate or Reduce Your Mortgage Payment?
Housing costs are usually by far the single biggest expenditure for any household. As such, your mortgage or rent represents a significant opportunity to reduce your monthly expenses.
- Use Savings or Other Assets to Pay Off Your Mortgage: A study by the Center for Retirement Research at Boston College found that it is unlikely that many retired households will be able to earn a return on risk-free investments such as bank certificates of deposit, Treasury bills, and Treasury bonds that will exceed the cost of their mortgage. Liquidity considerations aside, households holding such assets will generally be better off using them to pay down their mortgage. It then considers and (for most households) rejects the argument that households should retain their mortgage because they can earn a higher expected return in stocks and other risky assets.
- Is a Reverse Mortgage Right for You? A Reverse Mortgage enables you access to your home equity and eliminates your mortgage payment. Find out if you qualify.
- Have you Thought About Downsizing? Have you considered moving to a less expensive home?
Eliminate Unnecessary Routine Expenses
Sodas, lunch out, coffee, water bottles, lottery tickets, daily paper and other low cost items are everyday expenses for millions of retirees. However, these items are not necessary. And even though the daily costs are small, the total expense over a year could represent a significant savings.
A dollar a day is $365 a year!
Gas and Electric Savings
You might start by benchmarking your gas and electric expenditures. Call your service provider and ask them to compare your spending to other households in your area. Your service provider can also probably provide ideas for how you could reduce your usage.
Raising your thermostat in summer and lowering it in the winter, turning off lights, using energy efficient light bulbs and unplugging devices when not in use are easy ways to reduce your bill.
Again, benchmark your household against others in your area by consulting your water provider. And ask the utility for cost cutting tips.
Low flow toilets, fixing leaks, reducing the need to water plants with efficient landscaping are a few considerations.
Shop Around to Reduce Insurance and Cell Phone Costs
Auto insurance, homeowners insurance, and cell phone service are all highly competitive industries. As such you may be able shop around and find a less expensive option than your current provider.
Some services may be able to help you find a less expensive option:
Examine Your Health Expenditures
Even with Medicare, health costs can be astronomical in retirement. The right Medicare Supplemental plan can help you keep these expenditures under control. Consult with an insurer about whether or not your insurance is optimized.
Watch Your Food Budget
The Senior Citizens League (TSCL) recently found that 77 percent of seniors had reduced spending on food items.
Indeed, food can be a relatively easy way to reduce expenses. Eat at home and be vigilant at the grocery store to find the best deals.
In addition to traditional coupons found in newspapers, flyers and magazines, there are myriad web sites that enable you to find the latest coupons for all kinds of stores.
Most of these sites are searchable and are well worth a visit before you make any kind of purchase. Just try doing a google search for “coupon” and the store where you would like to shop or the product you would like to buy. You are almost guaranteed to find some kind of savings.
Or, try going directly to some of these sites:
Use the Library
Your local library can be a tremendous source of free entertainment. Books as well as movies can be borrowed without any cost at all.
Drinking and smoking and even candy bars can be terrible for your health. They can also be BIG budget busters.
Get Creative or Inspired
There are numerous web sites devoted to frugal living. Visit a few of these sites every month or so to help you think of ways to reduce your spending:
Or, browse and share tips in NewRetirement Answers.