Expert Interview: How to Stretch your Retirement Dollar
The last decade has been tough for retirees and those nearing retirement, says Gary Foreman, founder of The Dollar Stretcher.
“So many had counted on cashing out the equity in their homes to help fund retirement,” he says. “The crash of 2008 not only ended that dream, but also wiped out much of their IRA and 401k investments.”
And while there’s been some recovery over the past seven years, many perople still aren’t whole. This phenomenon combined with extremely low interest rates on savings means it’s been very hard to draw income from assets in retirement or to build them up for retirement.
Gary says it’s more important than ever for retirees to learn to stretch their dollars. We recently checked in with the former financial planner to get his advice on saving and earning money after retiring. Here’s what he had to say:
What are some of the smartest things retirees can do with their money to ensure they’re supported through their retirement?
Stay balanced. An over-reliance on any one asset class (stocks, bonds, cash, inflation hedge) can put you at risk. The current financial environment is volatile. Just look at the stock market taking 300 point swings on a regular basis. A balanced portfolio will cushion any shocks. And often, when one type of investment goes down, another goes up at the same time to offset the loss.
What are some easy, everyday ways retirees can cut their spending?
I find that there are two ways that retirees can cut spending on a regular basis.
First, use time to their advantage. For instance, grocery bills can be cut substantially if you eliminate prepared and convenience foods. Or time your vacation by scheduling it for the offseason or at the last minute to get great deals.
Retirees also can find savings using the new tools that technology is providing. There are many sites and apps that can help you find the lowest price on any purchase you make. Take the time to get familiar with them. These tools often reduce costs by 10 percent or more.
What about budget cuts they can make for the long term?
Many retirees hate to move out of the family homestead. That’s understandable. They raised a family there and many memories are stored in those rooms. Plus, moving can be a frightening thought if you’ve been in the same house for years.
But having two or three empty bedrooms can be expensive, not only in terms of upkeep and utilities, but also property taxes. So moving to a smaller home makes financial sense. If that’s not possible, consider renting out a room to help offset the extra expense. Many retirees are renting a room to either a college student or someone their own age who would otherwise live alone.
Where do you think retirees waste money or spend too much money? What should they do instead?
Each retiree is different. The best way to identify needless spending is to review your credit card statements and checkbook to see where you’re spending money. Typically, a half hour or hour spent with those statements will help you identify wasteful spending.
What are some ways retirees can supplement their Social Security/pension/retirement investments?
Many retirees are finding part-time employment. Others are creating micro-businesses that they run out of their home. Many are outgrowths of a long-time hobby. Some are based on knowledge learned during a long career. The opportunities are as diverse as building dollhouses to driving for Uber.
What are some less conventional ways you’ve observed retirees making ends meet?
Again, many are finding a small income to supplement Social Security and their retirement plans. Some of the less conventional ways involve the internet. I know of some who are shopping garage sales and Craigslist for items that they can resell for a profit on eBay. Others are selling crafts on Etsy or building backyard fire pits for neighbors. The possibilities are only limited by your imagination.
What news or headlines do you think retirees and those approaching retirement should be following today?
Retirees should pay attention to the cost of living and inflation statistics. Today’s retiree can expect to live into their 80s. Many will see 90 or even 100. If inflation should return to 6 percent, that would mean that prices will double every 12 years. So someone retiring today could easily see prices increase by three or four times. So being positioned for inflation is important. With the Federal Reserve pumping trillions of dollars into the economy through “quantitative easing,” there’s a real danger of inflation if that money ever starts to circulate. We could easily see inflation and interest rates like we had in the late 70s.
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