Retirement Planning

25 Practical Tips for Retirement Travel on a Budget

travel in retirement on a budget-boats on a river in a canyon

Traveling in retirement is the most common dream. Ask anyone about their retirement plans, and you will find something in common – a desire to see the world.

According to the Transamerica Retirement Survey, almost 70 percent of American workers want to travel the world in retirement.

Why? Because retirement is the ideal time of life to travel, enjoy and get a taste of places you could not afford to experience when you were younger. But travel as a dream often gets left unfulfilled because many people worry about the high costs of travel.

These 25 practical tips with help you get the most out of your money and still have an amazing travel experience in retirement.

1. Book in Advance.

Booking in advance is definitely worth it. Specifically, plane tickets do not get cheaper closer to the departure date.

The best time to book a flight is between 4 months and 3 weeks before the departure date when the tickets are most inexpensive. Similarly, you get extra time to compare hotel rates. Even planning as little as a month in advance is beneficial for your money because it gives you time to create a vacation budget.

2. Look for Last Minute Deals.

There are so many websites offering last-minute deals. In retirement, you can stay flexible so you can save a ton of money on travel expenses.

Here are a few sites to look at:

3. Be flexible with your travel dates.

When you are retired, you do not need to travel on a specific date and be home by a certain time. This flexibility can save you significant money.

In general, to get cheaper domestic flights fly on Tuesday or Wednesday or in the afternoon on Saturday.

Another tip is to avoid buying tickets on Friday, Saturday, or Sunday – these days are the most expensive to book airline tickets. Wait until Monday, Tuesday, or Wednesday when there not so many people browsing the internet to book the flights.

4. Fly when no one else wants to.

Another way to save money is to fly an early-morning or late-night flight.

You can significantly cut the costs of your airline tickets if you choose to fly between 5 and 7 a.m. or after 8 p.m. Prices are also cheaper if you fly after the major holiday or on the day of a holiday.

Thanksgiving and the eves and days of Christmas and New Year are the most affordable days to fly.

5. Be flexible with the dates for your stay.

Having a flexible schedule can help you save money not only on airfare but also on lodging.

Traveling over the weekends will usually be more expensive. Choosing a destination’s high season will most likely cost you more money as well.

While doing your research, see what the accommodation rate is when just changing the date by a day, by a week, or more. I recently looked at a hotel that charged over $900 a night for a room. Then a few weeks later, they had the same room for $200 a night. That is a huge difference for the same room.

6. Sign Up for Email Alerts.

You should sign up for free email alerts from your favorite airlines or other travel sites to get an early access to coupon codes and flash sales.

7. Buy your plane tickets at the right time.

According to a CheapAir.com survey, for a domestic trip, you should buy your tickets 21 to 115 days before your trip.

Ticket prices within this window will be within 5% of their lowest price. For an international flight, you should book your plane tickets at least 6 months in advance.

8. Find more affordable travel destinations.

When you are on the road, it can be hard to stick with your budget.

Luckily, there are plenty of affordable destinations out there. Some travel destinations will always be cheaper than others, so you can travel on a dime and still enjoy yourself.

You may want to do a Google search for the cheapest places to travel to learn what your options are. You can find ideas for places to stay in the US or abroad. Research your destinations in advance to calculate potential costs.

10 Best Places to Travel on a Budget.

9. Get creative with transportation.

Transportation is often a deal breaker while traveling on a budget.

The hardest part is finding the right plane ticket. But there are a few strategies you can use to make your destination affordable.

Airplane tickets become very expensive with the additional cost of reserving a seat, extra fares for check-in luggage, carry-on bags, food, in-flight entertainment, and more.

The best way to find a cheap flight is to compare prices. We use Skyscanner, Kayak, and Expedia to compare ticket prices and make sure we get the best deal.

There are a few other ways to cut costs on airline tickets:

Let the airline choose your seat.
Bring your own food.
Do not purchase in-flight movies and TV shows.

Once you get overseas, you can save money on popular budget airlines like Ryan Air, Easy Jet, or Wizz Air. You can fly between European cities for as low as 50 dollars.

10. Find cheaper ways to get around your destination.

Depending on where you travel in retirement, there may be many ways to get around.

If you are traveling on a budget in Europe, use their affordable public transportation. Nearly every European city has a fine network of subways, buses, trains, and trams. If renting a car is your favorite option go for it, just remember that in many cases it won’t be cheap.

Traveling by train is a great way to get around different areas, even to different countries. Reclining seats, Wi-Fi, and clean toilets allow you to travel in related comfort.

You might fly to Paris, Madrid or Rome and then travel by train to nearby countries or regions.

Keep in mind that traveling by train can cost more than by bus unless you have a rail pass or book your tickets a few weeks in advance.

The best way to buy European train tickets is through websites like Trainline, Omio, or RailEurope.

For example, if you travel around Italy, the high-speed train tickets will be more expensive (around 50-70 euros per ticket) than Italy’s regional trains.

Rick Steves gives a great overview of Italy’s rail passes and train tips.

11. Travel Overnight.

You can save money on a train or bus ticket by choosing an overnight route since they are less popular than day trips or flights.

Generally, bus and train tickets are often cheaper than plane tickets, especially if you are traveling long distances. In fact, sometimes it is cheaper to take a bus than to drive. Also, traveling by bus and train is often cheaper than flying because you can take more with you before paying extra baggage fees.

Additionally, if you travel overnight, you will save some money on accommodation as well since you will be spending the night traveling. However, it can be well worth the money, but it won’t be the most comfortable sleep ever.

12. Bring your own snacks.

If you are traveling on a budget in retirement, keep in mind that food makes up 16% of your travel budget.

Plan ahead and pack snacks to avoid making a hole in your budget fast. Granola bars, mixed nuts, fruit snacks, or cookies are never a bad idea to have in your bag rather than buy them at the airport.

travel in retirement on a budget - snack in a lunch box

Even when you go out on a tour or excursion, carry something to nibble, like fruit, nuts, or a baguette, so you won’t be starving every time you sit down to eat and order more food than you need.

13. Save on baggage fees.

Nobody likes paying for their bags when traveling by air, especially on a budget.

Check your airline policies and fees for both checked and carry-on bags. If you always fly with a certain airline, you may want to open one of its credit cards to avoid a checked bag fee. Plus, as a bonus, one of your travel companions on the reservation can enjoy a free bag as well.

Also, you can save money on baggage fees if you are packed light, and you won’t have to pay for checking in bags. Checking a bag may cost $30 or more for the first bag, and it’s even more if you have to check a second bag.

Packing light can also reduce your travel stress. Apart from avoiding additional fees, traveling only with carry-on means you don’t have to wait in line at the baggage claim, there is no lost baggage, and there is less to carry around. Real winner!

14. Find inexpensive housing.

Next to finding a cheap flight, finding inexpensive accommodation will have the biggest impact on your budget.

Everyone likes to splurge on fancy hotels but staying at the hotel while traveling on a budget is not the best option. Staying at someone’s house or condo can be more comfortable and affordable.

Consider staying at a pension (local boarding house) or B&B (bed and breakfast) so you can live like a local.

Depending on the type of accommodation you choose and the city (or a country) you are visiting, you could be spending from $50 to $300 or $400 per night.

15. Rent an Airbnb.

Renting an Airbnb is much cheaper. It is an ideal option for staying in one place for several weeks or even months.

This will allow you to save money on lodging and food because you will have access to a kitchen to cook your own meals. You can buy food at local stores and prepare it at home or ask your host for budget-friendly local places to eat.

Additionally, you can ask your host for some advice on places to see, shop and eat as a local.

Airbnb, VRBO, and Home Exchange are the websites that can help you save money on accommodation.

16. Cut travel costs on food.

Food is another big travel expense. Eating out three meals a day can take a big bite out of your travel budget.

According to Business Insider reports, you can expect to spend an average of $71 per person at fine-dining restaurants and that does not include tax and tip.

Many restaurants have the same menu for lunch and dinner, but they mark up the prices for dinner.

One of my favorite ways to save money on food while traveling is to eat a big lunch. Eating a bigger lunch will fill you up, so you can still have a small dinner at the end of the day.

17. Eat like a local.

Another way to cut travel costs on food is to go and shop at the local markets.

You can make your own breakfast or cook dinner with fresh ingredients instead of spending money at an expensive restaurant.

The best way to get a more authentic experience is to eat at local cafes and bakeries or find mom-and-pop diners.

18. Cut travel costs on activities and entertainment.

No matter where you travel, there are so many things to do that will cost you little or no money at all.

If you are first time in the city, check out the popular tourist attractions. Many historical buildings, churches, and sites do not cost money to view.

Hiking the trails, spending time on the beach, or checking out nature usually does not cost you money. If you bring your own lunch and water, you can have an amazing day outdoors without paying a fortune.

Many cities offer free local walking tours. But you need to do research and plan ahead of time to reserve your spot.

9 Best Websites to Book Free Walking Tours

19. Travel in the mid or off-season.

There is peak season and there is off-season for traveling. Traveling during the peak season is always going to cost you more than traveling during the mid or off-peak season.

You can cut the costs on plane tickets, hotels, food, museums, and tours. When places on your bucket list are less crowded, they are also less expensive.

Being retired means you can be flexible and avoid the touristy season with inflated prices so your trip will become more affordable. For example, summer (and winter in some places) is the busiest travel season for tourists in Europe.

Therefore, spring and fall are good for traveling on a budget. You can enjoy mild weather, smaller crowds, natural beauty, and low prices. However, the Caribbean islands are a good place to travel during the summer. It is cheaper because of the hot weather and hurricane season.

20. Go for longer trips and keep expenses low.

I would recommend traveling slowly if you want to cut the cost of your travel expenses in retirement. Staying put in one place longer will allow you to reduce the costs of tickets and accommodation.

For example, going on a trip to Paris would cost about $1,350 from Boston airport (round trip ticket), and a mid-range hotel about $250 per night. Overall, you can spend around $2,850 for transportation and accommodations on a one-week trip.

You can stretch that trip to two weeks and the price will only go up to $1500 for the hotel since you do not have to pay for the plane ticket for your second week.

The trick is to spend more time in one place so you can reduce your per-day travel expenses by spreading the cost of an airplane ticket over a long trip.

21. Sign up for a hotel loyalty card.

No matter where you travel, sign up for a hotel’s loyalty card so you can earn a free hotel stay in the future.

The loyalty programs are typically 100 % free. You can accrue points with your membership card and possibly your travel credit card too.

There are also other benefits to signing up for these cards. Sometimes you can get free hotel room upgrades, early check-ins, late check-outs, and additional discounts.

Best Hotel Loyalty Programs and How to Maximize Their Benefits.

22. Get a Travel Insurance.

The one thing that you cannot afford to do when traveling on a budget in retirement is to get sick. That is why you should seriously consider buying travel insurance.

This is an extra expense that can save you a lot of money if you were to get hurt or sick in a foreign country. Keep in mind that Medicare wouldn’t cover any medical/ emergency expenses when you are out of the country.

Make sure that your trip doesn’t turn up as a disaster and protect yourself from flight cancellations, delays, and lost luggage, especially when you consider flying with several stopovers.

The 4 Best Travel Insurance Companies.

Best Senior Travel Insurance by Forbes Advisor

23. Get a Local Sim Card.

Using roaming on your iPhone can increase your travel expenses fast.

Try to get a local Sim Card and use that phone plan for internet access while traveling. This way you can stay connected with family and friends back home without worrying about extra international charges.

When you arrive in a new country, just go to a local telecom store (the equivalent of Verizon or AT&T) and buy a temporary Sim Card.

24. Get a travel reward card.

If you do not have a credit card with travel benefits, then get one.

Travel credit cards are very popular because they give you cash back or points and travel rewards. You can collect airline miles and hotel points, or pay no foreign transaction fees while shopping.

A Chase Sapphire Preferred card is the most recommended by many travel blogs.

16 Best Travel Credit Cards.

25. Rent out your home.

If you do not plan on selling your home, you can put it to work when you are away traveling.

The typical house exchange is an arrangement where you swap houses with somebody else in another country or city. It is a great way to vacation if you want to stay in one place for several weeks or a month.

For example, I live in Boston and am planning to spend three weeks in Madrid. If there is someone from Madrid who wants to visit Boston at the same time, we can do a house swap. That way, I will save money on lodging and get to experience a new city in Spain.

The 11 Best Home Exchange Sites to Save Money.

Practical Tips to Make a Smooth Transition to Retirement

by Maggie Leave a Comment

a couple walking with travel bags to the boat - transition to retirement

Like many other life transitions, retirement comes with emotional and mental adjustments. Your transition to retirement will not happen overnight.

Most retirees will go through stages of emotions when adjusting to a new life. Give yourself some time to understand that this will be a process. Learn how to slow down. Pause and relax. The process of transitioning should be a gradual learning curve.

Here are a few practical tips to help you make a smooth transition to retirement.

Prepare for ups and downs.

The first year of retirement will be filled with bumps and adjustments no matter how well you are prepared.

Do not expect the transition from your 30+ years of work to retirement to happen without stress and anxiety. There are going to be surprises and disappointments down the road before you settle into something more comfortable.

There will be times when you feel lonely, isolated, or a bit lost, which is normal. But do not spend your time dwelling on thoughts about the end of your career, loss of identity, and loss of social connections.

Accept that you have done all you can working for many years and focus on your next phase of life. Make peace with it and move on to your next challenge.

Retirement Finances

1. Know your retirement expenses.

A good life costs money. You do not need to be rich to have a happy life, but you still need enough money to finance your retirement lifestyle.

As I have already explained in many of my articles, you need to figure out how much you actually need to retire and live a comfortable life. Obviously, that is a different amount of funds for everyone!

If you are close to retirement, have a clear snapshot of your retirement funds and where your money is going today. It can help you take control of your spending and saving habits.

If your numbers show that you will be able to cover living expenses and have enough left over to live a comfortable life, then you are on the right path. But if you have a significant shortage of funds you will need to cut your spending, save more, or even work for a few extra years.

2. Simplify your finances.

Many people use retirement as a time to make their life simpler. Smaller homes, fewer cars, and less stuff.

How to simplify your finances?

Consolidate bank accounts. Close multiple savings and checking accounts and consolidate them in one bank account. With fewer accounts to track, you will have less hassle remembering logins, websites, and spreadsheets.
Consolidate retirement accounts. Roll over multiple 401(k) accounts to a single IRA.
Get rid of paperwork and pay your bills automatically. Easy to track your payments. And you will reduce the stress of money management and make it less complicated.
Reduce the number of credit cards. Cut back to just one credit card.

3. New life on a fixed income.

In retirement, you will transition to living on a fixed income. Your salary will stop coming and your income stream will change.

But you have saved and invested your money preparing yourself for a new life on a fixed income. Your new income will come from the combination of Social Security, a pension, retirement accounts – 401(k), IRA, Roth IRAs, and investment accounts. This is what you have worked so hard for all these years.

Retirement Lifestyle

1. Develop a routine.

We all need structure in life and our job helped create that structure for many years. When we stop working the structure is gone.

What happens when you retire? It is Monday morning, but you do not need to go anywhere. There is nothing planned. There is no alarm clock and no morning rush.

The first few days or weeks will be exciting. You can sleep late, read in bed, or catch up on your favorite Netflix shows. But I am sure that by the end of the week or month, you will start feeling bored, isolated, and maybe a bit depressed. The fun is gone, and you will be glad to go back to something more meaningful in your life.

That is why you need to develop a routine and create a “new normal”. Some people love to have a daily routine, while others cannot bear to have everything predictable. But without proper planning and developing daily activities to get you up every morning, your retirement life will be dull.

2. Find hobbies and interests to fill your days.

I believe that everyone had some interests in life before they were forced to put it on the shelf during their working years.

older man run marathon - transition to retirement

All those things we regret not having time to do during our working years can act as an inspiration when we transition to retirement. It can be sports and travel. It can be learning something new – a new language or instrument. Also, it can be starting an art project or home remodeling.

Many pre-retirees are afraid to be bored in retirement, and I can relate to that feeling. Most of us spend our lives dedicated to responsibilities. We often forget how to live outside of our comfort zone.

If you are getting ready to retire, think about how to structure your days. Plan to allow yourself to try something new and even uncomfortable like going back to school or learning how to paint.

Here is a list of ideas:

Learn how to sail.
Start (or join) a book club.
Learn how to paint.
Take a pottery class (a photography class).
Take a cooking or baking class.
Write a poem.
Write an e-book and publish it.
Learn new digital skills – open an Instagram or Twitter account.

3. Keep in touch with your friends from work.

Losing your network of co-workers and office friends can be hard. Eventually, life in the office will go on without you.

Even though you are retired, it does not mean you have to lose contact with the group of your office friends completely. A simple email, text message, or phone call can lead to regular catch-up meetings with your friends from work.

Also, you can make arrangements for lunch or dinner dates once a month to stay in touch with your ex-colleagues. Most workplace friends will be happy to catch up with an old friend they have not seen for a while.

Once you retire, it is easy to become involved in other activities outside of the workplace. But keeping workplace friendships alive during retirement can help you mentally adjust to life without work.

4. Expand your horizons.

Travel is often high on the bucket list for retirees.

Many people (including myself) look at retirement as the best time of their lives, a time for adventure and travel. I believe that one of the biggest benefits of retirement is the freedom to explore the world and expand your horizons.

Do you have a retirement bucket list?

I have found it useful to create my retirement bucket list. That is a list of things I want to do and see in our local area and other countries.

I like to keep my bucket list updated with the name of new places I learned and the dates we want to travel there. Most of the time, Roman and I feel excited when discussing our travel plans and the places we want to visit.

A few ideas from my retirement bucket list:

Live in France for a year and learn French language
Go on a road trip through Sicily
Take cooking classes in Spain and learn how to cook paella.
Write an e-book.
Visit Brazil during the carnival and learn how to dance salsa.
Take a European river cruise
Grow a vegetable garden.
Design and build a lake house.
Go on a Safari in Africa
Visit Tahiti

5. Spend time with people you love.

Retirement can be a challenging time for relationships. When you stop working you will leave most of your friends at work behind.

Unfortunately, many will disappear from your everyday life the day you leave. It will take a lot of effort from both sides to keep friendship, once the common purpose of work is gone.

Growing older could be lonely unless you have support, love, and even friendship from your family. Do you have a good relationship with your spouse? Are you close to your children and their families? Do you spend enough time with your grandchildren?

Offer to go to the game or concert with your kids and grandkids. Consider a family vacation together. Spend all the holidays and other celebration times together.

Do you stay connected with other parts of your family like your brothers or sisters? Do you keep in touch with them regularly if they live far away? What effort do you make to stay in touch with them?

Unfortunately, many of us spend more time on Facebook, Instagram and Twitter to stay informed and connected with former classmates or colleagues because they post often rather than spend time with people who are important to us.

I read that one of the greatest regrets of people who are getting closer to the end of their lives is that they didn’t spend enough time with their loved ones.

Life is short! Make sure that you spend enough time with the most important people in your life.

Final Thoughts

Most of us look forward to retirement as a time to relax and enjoy our golden years. Finally, we can do whatever we want and when we want.

But the transition from work to retirement comes with its own challenges. Many people will learn how to adjust to retirement life in different ways. Everyone’s path will be unique. But you will know how to deal with challenges if you are prepared.

Following the practical tips above will help you transition to retirement better so you can feel happy during your new phase of life.

Helpful articles you might want to read:

Like this article? Share it!

Is Relocating in Retirement a Good Idea?

by Maggie Leave a Comment

houses next to mountains-relocating in retirement

According to studies, 36 % of those 50 and older want to stay in their current home when they retire. Yet almost 37% of retirees have moved since retiring. And 27% expect to move at some point.

What is right for you depends on your lifestyle, financial resources, and personal preferences on climate, activities, and proximity to friends and family.

If you have just retired or are a few years from retirement, you may be thinking ‘Where should I live in retirement?”

Sometimes there are good reasons to relocate in retirement.

You want to be closer to your family.

For many people, there is a good reason to move in retirement because they want to be closer to family or friends.

Right now you may have no real plans to go anywhere. But if your adult children are planning to move away, you do not have to feel stuck when your family no longer lives near you.

Some retirees prefer to move to another state or area to be closer to their children and grandchildren. As we age, having family members nearby can be crucial as we must rely on their help more than ever before.

Also, if you suddenly lose a spouse after moving across the country, you will find support by being closer to your family. On the other hand, if you move you will be leaving your friends behind.

You want to move where the cost of living is cheaper.

This may not matter to you if you have saved a good nest egg for retirement. But most people have a limited amount of retirement savings. Moving to a more affordable place to live could make all the difference in allowing your savings to last longer.

If you currently live in an expensive area, you should consider moving to a place with a lower cost of living. The sooner you relocate the easier it will be to make sure you do not spend your savings fast.

Keep in mind that housing is your biggest budget item. Even in retirement housing costs as a percentage of spending will remain around 35% on average.

Reducing your housing costs now will give you more cash to put toward your other retirement goals. Once you are retired, the fact that you have lower housing costs means you will need less income in retirement for this essential expense. Plus, you will have freed up more income for other retirement expenses. That could mean more travel or spoiling your grandkids.

You want to move where taxes are lower.

Even in retirement, you must pay taxes. The cost of living is important. But how much you pay in state income tax also plays an important role when you live on a fixed income.

Some states are tax-friendlier than others. The following states do not have a state income tax:

Florida
Nevada
New Hampshire
Tennessee
Texas
Washington

Moving to a state with low taxes and estate taxes may be worth considering if you have built a sizable amount of retirement assets that will be taxed as you withdraw them.

For example, if you move from Massachusetts to Florida, you rid yourself of state income tax. But if you move from New Hampshire to South Carolina, you have to start paying state taxes.

You want to downsize to a smaller home.

If your current home is too large for you, you should consider downsizing.

Find a house that is easier to maintain. Downsizing is not just a physical change. Sometimes it is a way to create a new life in a new space.

Moving also allows you to choose a home better suited to your needs during your retirement years.

By moving from a single-family home to a condominium you are trading stairs and mowing the lawn for less space and more amenities, including indoor and outdoor swimming pools, a gym, a club room, etc.

Also, it might be a good time to sell your home if you know that it will sell for a great amount of money in the current housing market. You may get a high bid for your home and then be able to move anywhere you want to.

If you have always wanted to travel in retirement, then selling your house may be a great decision. You can rent a condo or apartment so you will feel free to travel often and not worry about maintenance, repairs, and yard work. Even if you just downsize to a smaller home, you will have more money available for your travels, and hobbies.

A move can also reduce your costs if you are looking at relocating to a senior living community.

Some of these communities are all-inclusive with dining, shopping, and fitness/spa located in one spot. In exchange for an HOA fee, things like maintenance and lawn care may be covered for you which means less stress on your wallet and time.

You prefer to move to a place with a better climate.

If you want to avoid the Northern winters, you might want to relocate to a different geographical area with a better climate.

After living in a cold climate for years, many retirees prefer to move to a warmer climate so they can stay active and enjoy spending more time outdoors. I hear all the time people saying they want to retire at the beach. But have they ever spent time in a beach community in the off-season? It can be a very different place.

However, if you have never lived in a warmer climate before, you will need to get yourself time to adjust. Do not expect to get used to the new temperatures immediately. Be patient with yourself and learn how to adapt to the new climate.

Additionally, if you have health problems, talk to your doctor about planning to move to a different climate. Your doctor should help you make the transition easier. Some medications may even interfere with your body’s ability to tolerate temperature changes.

There are plenty of advantages to living in a warmer climate but there are also damaging weather conditions such as hurricanes, tornadoes, etc. Be sure to ask your real estate agent questions about special insurance policies you need to cover any weather-related damage if you own a home in that area.

Why to stay put and retire in place?

Ideally, retirement is supposed to be a time when people move to a warmer climate to sip drinks on the beach or to play endless rounds of golf. But in reality, a huge percentage of Americans are happy to stay put and retire in place.

There are many good reasons to retire in your hometown.

It is cheaper to retire in place if your mortgage is paid off.

Moving is an expensive task both in time and money.

You will spend a large amount of money and time looking for a new home, preparing your existing home to list, paying realtor fees and real estate taxes. Then hiring movers, moving, paying closing costs, and renovating your new home to fit your style and taste. If you stay put these expenses can be avoided.

Remaining in your community.

You are lucky if you can afford to stay where you are in your retirement years. You get to keep what is familiar and comfortable in a home filled with memories.

Additionally, staying closer to your friends and neighbors will help you fight the loneliness and isolation that often comes with retirement.

As we age, our ability to socialize and meet new people shrinks. Perhaps, that is because we are no longer working, or maybe we do not have enough energy to make a bunch of new friends. That is why remaining in your community gives you access to people who have known you for years, maybe even a lifetime.

Additionally, if you stay close to home, it might be easier to find work if you start depleting your nest egg fast. Perhaps you can reach out to the old group of friends or colleagues to find opportunities for a part-time or freelance job.

Great healthcare system

If you live in an area that has a great healthcare system, that is something to consider before moving somewhere else. Moreover, you will be seeing the same doctors that know you well.

In retirement, the typical household spends around 12 percent of its household income on medical expenses annually. That amount increases to nearly 16 percent by age 75.

If you are trying to keep your out-of-pocket costs as low as possible, do not rush to leave affordable health care behind.

Update your home for aging in place.

If you decide to stay put, make sure it works for you.

Take a critical look at your current home and decide what changes you have to make to your home that will pay off in the future.

Here are some items that might be on your future project plan:

Add, expand, or renovate a bathroom.
Extend your bedroom and add an ensuite.
Redesign your kitchen to fit your new lifestyle.
Create an office space. It will help if you plan to do any side work or freelance.
Create a guest room. If your children and grandchildren come often for a visit, having a separate room will help them feel more comfortable.
Create an outdoor space to be your sanctuary.

As we age, so will our homes. Today we move effortlessly around our homes. But as we grow older our mobility will decline.

house with a wheelchair person - retire in place

As a result, those stairs might not be so easy to fly up and down to get to the second-floor bedroom. Or how about the bathroom? Climbing in and out of your tub could become a slippery risk.

Even the simple task of climbing the entrance stairs to get into your home might be an issue at some point. If you plan to stay put and “age in place”, start figuring out how much it would cost to make your home senior-friendly.

You need to find ways to make your home easy to access no matter what your age, size, or abilities.

Options might include:

First-floor master bedroom
First-floor bathroom
Bathroom grab bars and railings
Curb-less showers
Shower seat
Non-slip safety flooring
Task lighting in the kitchen and other work areas
Wide doorways to fit walkers and wheelchairs
Entryway ramp
Well-lit hallways

Home Renovations for Aging-in Place

Deciding where and how to live always involves some research and detailed planning. So, put your planning skills to work and think about where you will be comfortable living in retirement.

Here are a few related posts you might want to read:

Like this post? Share it if it helped you!

7 Simple Ways to Pay Yourself in Retirement

by Maggie Leave a Comment

man and woman at the laptop - retirement income plan

We all have our dreams of retirement. But whether you plan to travel the world or just enjoy the freedom of doing nothing, we all have one thing in common – figuring out how to pay for our life in retirement.

Perhaps the biggest challenge of transitioning from work to retirement is learning to live without a regular paycheck.

Instead of receiving a steady income from the employer you suddenly find yourself dependent on Social Security, a pension (if you are lucky), your investments and savings. But as Social Security dwindles and pensions become a rare commodity, it is more challenging to build a dependable and consistent retirement income that meets all your needs.

After decades of earning income and saving for retirement, you finally need to shift gears and learn how to spend what you have saved.

In this post, we look at Suze Orman, America’s most recognized financial guru, recommendations on how to pay yourself in retirement and not run out of money.

1. Know your living expenses.

This sounds so basic, but most people do not know what they really spend each month.

You might have a good idea of how much you spend on mortgage/ rent, utilities, cars, and groceries. But you forget to add occasional trips, gifts, gym membership, eating out, etc. All these expenses can drain your money fast.

In her book, The Ultimate Retirement Guide for 50+ Suze Orman recommends calculating everything from major costs such as mortgage payments, utilities, transportation and groceries to smaller purchases like clothes, accessories, and entertainment.

The best way to do it is to create a list of your living cost categories and calculate your monthly spending.

If you want to automate calculations and track your expenses use the technology. A good quality budgeting app will track your expenses for you and save you time.

Best Budgeting Apps from Forbes Advisor

2. Calculate your reliable retirement income.

This one is a very important calculation and is not always easy to figure out.

But you need to calculate all sources of your retirement income to get a clear picture of how much money you will have coming in.

There are three building blocks to your retirement income:

Social Security benefits
Pension income (if you are eligible)
Income from your investments

Social Security benefits and pensions are considered guaranteed income and it’s easy to calculate.

Go to the Social Security Estimator to find out your calculated benefits depending on the age you start collecting.

But to secure a dependable income from your investments can be tricky because you will be at the mercy of market fluctuations.

You can still create a retirement paycheck from bond and dividend payments investments. However, there are several drawbacks to interest and dividend investing. First, many retirees cannot live on interests and dividends alone. Second, dividends are never guaranteed. During difficult economic times, some companies choose to cut or eliminate their dividends.

3. Pay your fixed living expenses from guaranteed income.

Your retirement income plan should be built on the common sense of stability.

The stability you want should allow you to pay all your essential living costs no matter what. If the markets are going down, you want to know that you have enough income to cover your basic living expenses.

There are three types of retirement guaranteed income:

Social Security
A pension
An income annuity you purchase yourself.

Guaranteed income means that these income sources are set and will not go up or down with financial market changes.

Your goal should be to cover all your essential living expenses from these guaranteed income sources.

Here is a list of essential living expenses:

Mortgage/ rent
Utilities
Transportation
Groceries
Medical insurance

An income annuity (fixed income annuity) is a personal pension you create for yourself.

You can purchase an annuity from the insurance company in exchange for an agreement to send you a locked-in payment every month once your annuity starts.

Keep in mind that any type of annuity is an expensive insurance product. And if you buy an income annuity, the money you pay the insurer is no longer yours.

Here is the list of income annuities to consider:

Immediate income annuities. You pay your one-time premium to the insurance company, and payments start immediately.
Deferred income annuities. You buy the annuity today, but do not start the payouts until a set period of time, such as 5 years or 10 years.

But if you place a high value on having a guaranteed income, you should consider adding an income annuity to your other sources of guaranteed income such as Social Security and/or pension.

Retirement Annuities: Know the Pros and Cons

4. Keep at least two years of living expenses in cash.

Every household needs an emergency fund that can cover up to 6 months of their living expenses or even longer.

According to Suze Orman’s advice you need to have a separate bear-market emergency fund in retirement.

This fund should have at least 2 years of living expenses in it. If you expect that you will not cover all your living expenses from guaranteed income, then she recommends keeping 3 years of expenses in safe accounts. And this fund is in addition to your typical 6 to 8 months emergency fund.

Emergency cash fund gives the flexibility you need to handle financial markets downturn. This fund is also where you get the money to pay for out-of-pocket medical expenses if it is unexpected.

In her book, she recommends creating this bucket of cash from your bond portfolio.

For example, if you have $500,000 in investments, it should be split into $250,000 in stocks and $250,000 in bonds. Let’s assume your annual living costs are $35,000. You should move at least $70,000 (two years of living expenses) of your bond portfolio into savings accounts, CDs, or short-term bonds.

This fund is a helpful alternative to instead of selling stocks for a loss or taking a high-interest personal loan for an emergency.

5. Hatch an RMD plan.

RMD stands for required minimum distributions – the minimum amount of money retirees must withdraw from their retirement accounts when they reach a certain age.

If you have savings in tax-deferred retirement accounts such as 401 (k) and IRA, the federal government is going to force you to start taking money out each year.

Even though you do not need the financial needs to touch these accounts, you still must start making annual withdrawals. Neglecting to withdraw money on time can cost you thousands of dollars in penalty fees.

Just because you must take withdrawals from your retirement accounts, that does not mean you should spend all of it. After you pay the IRS their tax, do with your distribution what you want even consider reinvesting some of your RMDs in a regular taxable account.

And do not worry you do not need to do the RMD calculation yourself. The company where you have your IRAs and 401(k)s invested will calculate your RMD for you.

6. Plan to spend no more than 3% of your portfolio in your first year of retirement.

Most of us closer to retirement are familiar with a popular 4% rule for retirement spending.

The 4% rule says that you should be able to comfortably live off 4% of your retirement savings. For example, if you have $1 million you would withdraw no more than $40,000 in your first year of retirement based on the 4% rule.

Keep in mind that you should adjust that amount each year by the rate of inflation.

However, Suze Orman recommends spending no more than 3% of your portfolio in your first year of retirement.

For example, if you have $1 million you would withdraw no more than $30,000 in your first year of retirement. Even though your RMD will be higher than 3%, she recommends spending just 3%.

The most important factor to consider is whether you retire in a bull market or a bear market.

If you have the misfortune of retiring in a bear market, you should be spending as little as possible of your portfolio. Taking money out in a bear market leaves your accounts depleted. By scaling back your withdrawals you will give your money time to recover.

7. Stay Flexible.

The most important part of your retirement income plan is to stay flexible as your life situation changes and modify your plan with time.

You can still retire at 65 but you can delay retirement to increase your Social Security benefits. Also, think about picking up a side hustle or a light part-time job to supplement your guaranteed income and maintain your retirement lifestyle. Consider these options when working on your retirement income plan.

Also, you can always plan on spending less to make retirement more affordable.

Maybe you should postpone a luxury cruise vacation or trim your monthly dining-out habits. Maybe you should reduce cash gifts to your kids and grandkids or consider downsizing your home to save thousands of dollars on housing costs.

But whatever you do, keep your retirement plans realistic.

The final words of advice – it is never too late to start finalizing your retirement plans and calculations. The earlier you start, the better prepared you will be.

Here are a few related posts you might want to read:

Like this post? Share it if it helped you!

8 Budget Categories You’ll Likely Spend More in Retirement

by Maggie Leave a Comment

cruise ship - budget categories to increase in retirement

Many of us have big plans for our retirement including traveling the world, moving to another country or state, learning new hobbies, and reading every book.

But if you add those big plans to increased free time, reduced income, skyrocketing medical bills, and other emergency expenses associated with aging it will be hard to assume that we will spend less in retirement.

Our prospects to avoid outliving our nest egg significantly depends on our retirement expenses. It is really hard to predict how much we will actually spend on housing and health care when we retire. But we still have lots of other options for saving money and should not fall into the trap of overspending.

Here are 8 budget categories where you’ll likely spend more in retirement:

1. Travel and Vacations

Travel is the number one spending category on most retirees’ budget lists.

Many people are looking forward to doing all the traveling because they never had enough vacation time while working. It is so exciting to kick back and make big travel plans for your retirement bucket list.

But it can be so easy to overspend on travel and long vacations. You worked hard all your life, so you feel you deserve that 2 weeks of luxury cruise vacation or spend time in Paris. Compared with their working years, many baby boomers like to take longer cruises or cruises that visit more destinations.

But you may find yourself spending more on travel in retirement than your budget can afford it.

To make your dreams more affordable:

Take advantage of the last-minute deals
Travel during off-peak seasons
Ask for senior and AARP discounts.

2. Medical expenses

It probably doesn’t come as a big surprise that we spend more on medical care as we grow older.

Healthcare costs will be one of the top expenses that most retirees have to deal with. Unfortunately, medical care costs will keep increasing as we age.

The Employee Benefit Research Institute published their study that the percentage of a household’s total spending on health care increases from 8% in preretirement households to 19% by the time a household is past the age of 85.

For the average family, the unpredictable and costly new diagnosis can create an increase in healthcare spending. Also, overall spending on health insurance premiums, prescription drugs, medical supplies, and medical services will go up.

How to save money on medical expenses?

In addition to having the best available medical insurance, the best way to save money on medications is to use generic versions of drugs rather than the name brand.

Also, you can save money by shopping around at your local pharmacies, comparing costs online, or ordering in bulk by mail. Depending on the type and amount of medication you need, the savings could be thousands of dollars for your budget.

3. Fitness

Fitness is one of the new biggest expenses that many retirees spend money on.

According to statistics, approximately 53% of retired Americans participate in physical activity and allocate about 13% of their annual spending to fitness and leisure activities.

Retirement serves as a motivator to get fit. With more time on their hands, people start exercising more and spending money on gym memberships and fitness classes.

Also, the fear of declining health as we age motivates us to take fitness seriously. Many retirees choose to drop unhealthy habits such as drinking and smoking and pick up healthier ones.

4. Moving and Relocating

Many empty nesters start thinking about downsizing. With the kids gone, you might find it hard to keep living in 4 bedrooms house that feels too big and empty for you.

Downsizing a big home for a smaller house or condo comes as a smart strategy to save money in the long run. But the moving and relocating process can set you back thousands of dollars.

Overall, moving can be a stressful experience. Sorting through your belongings, packing, and cleaning can be overwhelming. In addition to that, high inflation will make your moving costs increase significantly.

Everything involved in a move will cost you more – movers, truck rentals, supplies, storage, etc. In addition to downsizing your home, you will need to downsize and replace your furniture – replacing a big sofa and club chairs with a smaller couch, a king-size bed with a queen-size bed, or a big dining table with a smaller kitchen-size set.

5. Vacation Home

Many baby boomers think about downsizing or moving to a different location. Others looking at the option of buying a second home to use it as a vacation home.

couple walking on a beach - buy vacation home in retirement

If you have set yourself up financially well for retirement, it can be tempting to splurge on a luxury home in a place you have always dreamed of. But in many ways, this will result in overspending.

The responsibilities of homeownership are similar for your vacation home as your primary residence. You need to consider the costs of your monthly mortgage payments, routine repairs, furniture, appliances, etc. It’s important to consider whether you are financially ready to take on these extra costs without depleting your savings and running out of money fast.

It is common for baby boomers to purchase a vacation home in a different location than their primary residence. It makes sense to choose a home in your favorite vacation destination or area with a different climate.

But it is easy to forget that the cost of living can be higher in these locations. That is why it is critical to understand the cost of living and property laws in your new location before making a final decision.

6. Utilities and Household Help

If you noticed that your utilities went up due to the inflation and working remotely, welcome to another reality of retirement.

According to the studies, the average retired household spends more each year on utilities than the average working household. It’s rather simple. Retirees spend more time at home, so they are using more utilities.

When you retire, you will see a bump in your bills such as gas, electricity, water and sewer, cable, and streaming devices because they will be used more often.

As you age, you may need to hire household and maintenance help more often than before. Maybe you do not need that help right now, but as you grow older, you will need help with raking leaves, shoveling snow, cleaning roof gutters, mowing lawns, etc.

If you want to age in place, you can get any type of personal care, household help, and services in your home which comes with a price.

According to estimates from Genworth (Financial Solutions for Long-Term Care), the median cost of hiring a home health aide is approximately $5,000 a month. And a medical response system, which is usually based on a monthly subscription, can be as much as $90 each month.

Aging in Place: Growing Older at Home

7. Groceries

It is so easy to overspend on groceries because food is going to be your third biggest expense in retirement after housing and transportation.

On average most retirees spend around 20 percent of their income on food. These food expenses include groceries, alcohol, and dining out.

Food costs will vary depending on your diet and habits. For example, people who prefer to buy organic produce will likely spend more money than people who do not.

While you may prefer to shop for groceries in one store, it might be wise to go to different stores. Different stores run promotional sales or offer coupons that can bring the price of your groceries down. Rather than simply buying all your groceries at one store, you can save a lot of money with just a little planning ahead.

Also, eating at home more frequently will cost less than eating out. The reality is that the food you cook yourself is the cheapest food you eat. When you retire and have plenty of time, there is no more excuse such as “I do not have time to cook”.

After all, learning how to cook can become your new hobby.

8. Gifts to Family and Charitable Donations

In retirement, many people become generous with gifts to relatives and friends. They feel it rewarding to share the wealth they have accumulated during their lives.

Gifting is certainly a nice gesture that comes with the feeling of being generous. But you have to be careful and not drain your retirement funds by supporting your adult children’s lifestyle or spoiling grandchildren with vacations. One day you may end up in a position where your own lifestyle suffers.

Many retirees spend too much of their income on family and friends, while others donate excessive sums to charities. There is nothing wrong with giving donations to your favorite charity or church. But as much as you believe in generous donations, it might qualify as excessive spending.

It’s a good idea to include money for gifts and donations as a separate category in your retirement budget. If you really want to give more to charity, reduce other portions of your retirement budget such as eating out, entertainment, and expensive vacations.

Like this post? Share it if it helped you!