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reduce retirement expenses

21 Smart Ways to Cut Retirement Expenses

by Maggie Leave a Comment

woman with laptop - cut retirement expenses

Cutting or reducing expenses in retirement can be tricky. You can save money on less dining out, business clothes, and commuting. But you will still have monthly expenses related to food, housing, and transportation along with all the other services you rely on.

However, you can still find ways to live comfortably after retirement. It just takes extra advance planning. Here are some tips to help you reduce or cut those retirement expenses.

How to Cut Lifestyle Costs During Retirement:

1. Trim your lifestyle and spending.

Before you trim your lifestyle and spending you need to know where your money is going. It is impossible to save without knowing what your expenses are each month. Many people are surprised to learn how much little things will add up.

For example, spending $4 – $5 for take-out coffee each day can quickly become an expensive luxury at the end of the month. The best advice is to add all expenses and see where you can trim, especially if there is a shortage each month.

Also, take a look at your purchases over the past few months and see if you can eliminate some spending habits. It might be a gym membership or yoga classes you do not go to anymore. Or maybe you can start cooking more meals at home instead of going out to eat often or ordering take-out every other day. Do not forget to keep a diary to track your spending.

2. Reduce restaurant spending.

One of the easiest expenses to cut if you want to save more is restaurant meals. Eating out is always more expensive than cooking at home. If you still want to eat at restaurants, try to reduce it to one or two visits per month. You can also opt for appetizers or split an entrée with your dining companion to save money when you are eating out.

Another option is to skip drinks and desserts at the restaurant and then treat yourself to a nightcap drink and dessert at home. It will help significantly to stretch your budget.

3. Party early.

You can save around 35% on food and 20% on drinks by eating out during a happy hour rather than peak dinner hours or later. You can check your neighborhood places to find out when they host happy hour.

Additionally, check the Happable.com website to get details on happy hour deals at local chain restaurants.

4. Prioritize entertainment needs.

Life should be fun, and entertainment is nice to have but it is not a necessity. If you are bored and looking for free or low-cost entertainment options, explore events like local art fairs, movies, or free concerts in the community park.

Taking yoga classes or reading books from the library can also be helpful if you do not want to spend a lot of money on your hobbies.

5. Get discounts on entertainment.

If you want to save on entertainment costs, I recommend taking advantage of free days at museums, entertainment centers, national parks, etc.

Another good idea is to monitor discount ticket apps and websites. Several digital businesses offer concerts, comedy clubs, theater, and other cultural events tickets at big discounts.

They include Groupon, Goldstar, and Today Tix.

Also, your local community might offer free concerts and other in-person or virtual events.

6. Enjoy community events.

Getting out and having new experiences can be expensive if you live on a fixed income. But you can find free or low-cost events in your community. Check listings at local libraries, churches, or community centers, or websites like Eventbrite.

Community events can be an economical way to keep grandkids engaged and spend time together with the family. Don’t forget to pack snacks and water to minimize the amount of money you spend on food or turn it into a family picnic.

7. Vacation for less.

Experiencing new homes away from home doesn’t have to be expensive. Check out destinations within the driving range of your town. You might be able to find an entirely different climate and change of scenery just an hour away. Also, explore options like home-sharing services to save money on hotels when traveling.

Plan your travels on Wednesdays and Thursdays. Most hotels, resorts, and inns offer lower rates on weekdays rather than weekends. So, you can plan your trips by going midweek and save money. Some resorts even offer better prices on Sunday through Thursday packages.

Book hotels last minute if you can. If you are planning a road trip and you are flexible about where to stay, book your hotel two weeks in advance rather than four months out. You can save up to 13% by being flexible on your schedule.

8. Travel off-season.

If you are planning to spend your retirement years traveling the world or the US, book your vacations off-season to save money on traveling. You can save a lot of money by booking flights and reservations outside of peak travel times – for most places that is summer.

In addition to traveling during the off-season, think about other ways to find big travel savings in retirement. Consider subscribing to a discount flight finder website to receive lists of the best flight deals to your destinations. Make your travel plans well in advance so you can track flights for at least a few months to find the best deals.

It is a smart idea to use a designated travel credit card for your everyday spending. Redeeming points and miles for flights and accommodations can mean big money savings for your retirement budget.

How to Handle Your Money During Retirement:

9. Understand how much you are spending.

Look at your spending over the last 3 months using your banking statements. If you use cash occasionally, write down what you think you spent on some of your purchases. Start keeping a spending diary, spreadsheet, or notebook so you get an accurate view of your expenses.

10. Budget for now and the future.

Saving is always important, even after you have retired. Create a retirement budget and allocate some funds for savings. Try to build a solid emergency fund that could cover at least 3 months of your expenses in your savings. So, you would need to sell your stocks or bonds in a rush to cover an unexpected bill.

11. Set up a retirement budget.

Setting up a retirement budget will help you limit your expenses and ensure that you have enough income to work with other major steps. If you are worried about running out of money in retirement, consider reaching out to a financial planner.

A financial planner will help you make sure that you are spending the optimal amount of money for your financial situation. Even though financial planning comes at a cost, it can be a huge relief to get professional support for managing your money in retirement.

12. Create 50/30/20 budget.

One smart way to manage your retirement money is to follow a budget which means setting priorities for your spending. You can create a 50/30/20 budget for your money management.

This approach means that you will spend 50% of your after-tax money on your needs (essential), 30% on your wants, and 20% on savings and any debt payments.

Your 50% essentials should include:

  • Housing
  • Transportation
  • Utilities
  • Groceries
  • Insurance

30% of your income for your wants:

  • Gifts
  • Charity
  • Entertainment
  • Travel
  • Hobbies

13. Think about housing costs.

Usually, housing is the single largest expense in most households. So, look at your monthly housing expenses and think about how you can downsize or lower the costs to save money.

Whether you are approaching retirement or already retired, consider these strategies for reducing your housing costs:

  • Pay off your mortgage. If you have the ability to pay off your mortgage in full, go for it. Doing so can eliminate the biggest expense in your retirement budget.
  • Downsize to a smaller place. Some retirees choose to downsize their big homes by moving to a smaller house, condo, or townhouse. This can be an especially good option if you have a lot of home equity, or your mortgage is paid off. In this case, selling would allow you to buy a new smaller home in cash and pocket the difference. Downsizing to a smaller home can also help you cut back on utilities costs, taxes, home insurance, maintenance, and yard care.

14. Reduce your debt.

When living in retirement on a fixed income, you will not have more money tomorrow to pay off the debt that you accumulated today. Debt payments can be a huge burden on your retirement budget. Also, debt is stressful because it can accumulate quickly when it builds interest.

If you are carrying any high-interest rate debt in the form of credit card balances and personal loans, make a plan to repay it ASAP.

High-interest debt is always a burden on your long-term budget because the longer you spend paying it off the more you sacrifice on interest charges. That is especially true when you are living on a fixed income. Reducing your debt faster is a big opportunity to save money in the long run.

15. Sell a car.

For most retirees, the transportation expenses are the second biggest spending category. According to stats, the transportation costs are 16% of retirement costs. That is even more than healthcare costs, which is 13.4% on average.

If you still have two vehicles, consider selling one. You may no longer need two cars for your household when you are not commuting every day to work. If you still have to drive around, to the events or appointments, you may be able to coordinate with your spouse or partner to get by with just one car.

Downsizing to one car can help you save on car loan payments, gas, car insurance, and maintenance costs. Additionally, if you live in an area with good public transportation and many walkable streets, you may be able to get around without a car.

16. Reduce insurance premiums.

Another way to cut your retirement expenses is to reduce insurance premiums. You can ask your home insurance company for a senior discount. Many home insurance companies provide discounts for retirees because they spend more time at home which reduces the risk of fire, flood, or robbery.

Also, you can tell your car insurance company that you will no longer be driving to work. The more you drive, the more chances for you to get into an accident. Daily commuting is a big risk factor because car collisions typically happen during periods of heavy traffic. When you retire, contact your car insurance company, and ask them if you qualify for a low-mileage discount.

17. Prep for grocery shopping.

A little work before you go to the grocery store can go a long way toward saving money on food. Check your pantry first and make a shopping list to avoid an impulse to buy something you do not need.

Use coupons, and senior discount days and join loyalty programs to maximize your savings as you shop. In exchange for sharing your phone number or email address, your local store’s loyalty program might offer additional discounts.

If you shop for groceries at a large store like Target or Walmart, you can often find additional savings by downloading the store’s app on your phone. Apps like Flipp help you sort through sales flyers and coupons from local stores when you enter your ZIP code.

Many credit cards offer cashback today. Search the internet for cards that offer the most cash back for groceries. You might find a card that will give you 3 or 5 percent back on food purchases.

Websites like CardRates and NerdWallet let you compare your card with others.

18. Restrict online shopping.

One way to avoid overspending is to restrict online shopping. The temptation to spend is everywhere we look, especially on our screens. You can make it more difficult to shop online by shopping online only with purpose.

To prevent buying things you do not need, avoid aimlessly browsing your favorite websites or online sales like Black Friday, Cyber Monday, or Super Saturday sales.

Another way to restrict online shopping is to give yourself a cooling-off period between the time an item catches your eye and the time you actually make the purchase. Consider putting the item in your online shopping cart and then walking away until you have had more time to think it over.

19. Lower medical care costs.

We all know that medical costs can add up in retirement. Many retirees are worried about rising healthcare costs and unexpected medical expenses.

One of the best ways to save money is by doing your best to stay healthy. You can improve your overall health by building exercise and healthy eating routines. It is important to remember that preventive care is a big money saver. You should go and see your doctor regularly for preventive health care measures.

If you are a smoker, you should consider quitting smoking. It will help you greatly reduce the risk of certain health problems which eventually can help you save on health care expenses.

20. Do It Yourself.

When you are retired, you are usually rich in time. That means you can now tackle household maintenance items on your own instead of hiring someone else to do it. In addition to cost savings, you will keep yourself busy doing physical tasks to live longer and be healthier.

Another way to save money and go with the ‘do-it-yourself’ route is to get creative with gifts. During the holidays you can save money with affordable gifts like baking cookies or preparing someone’s dinner. You can also treat someone with the gift of your time by taking them to a local (free) museum, art gallery, or a community event.

21. Seek out bargains and discounts.

Using senior discounts is another way to live on less money and still enjoy your retirement. Seek out bargains, use coupons and deals websites to take advantage of senior citizens’ discounts. The money you save adds up over time.

Retirees can usually save on restaurants, travel groceries, and much more by simply shopping on specific days or verifying their age when checking out.

You can ask for a senior discount at many places:

  • gym membership
  • local museums and concerts
  • state parks and beaches
  • golf courses
  • restaurants
  • local stores and supermarkets

Read More: The Complete List of Senior Discounts

Related posts you might want to read:

  • 15 ways to Live on Less Money in Retirement
  • 8 Budget Categories You’ll Spend More in Retirement
  • 5 Biggest Retirement Expenses and How to Reduce Them
  • Should I Pay Off a Mortgage Before Retirement?
  • How to Prepare a Retirement Budget in 5 Simple Steps

Like this post? Share it if it helped you!

Filed Under: Money Management, Retirement Expenses Tagged With: reduce retirement expenses, retirement budget, retirement expenses; retirement lifestyle; spending in retirement

How to Cut Expenses Before You Retire

by Maggie Leave a Comment

woman with laptop - cut expenses before retirement

If you are near retirement age, these tips on how to cut expenses will help you save more and give you the freedom to retire sooner.

And if you are still working, you are in a great position today to improve your life in retirement because you still earn an income. Your remaining working years could be a great time to explore some smart options of cutting expenses before you stop working.

According to the Bureau of Labor Statistics, Americans aged 65 and older spend about $48,000 per year ($4,000 per month) on average.

In retirement, most of your money will be spent on 3 big categories – housing, transportation, and medical.

According to the Bureau of Labor Statistics Consumer Expenditure Survey, for adults aged 65 and older:

  • Housing represents 34% of spending
  • Transportation represents 16% of spending
  • Health care represents 13% of spending

1. Reduce housing cost.

I do not have to tell you that your housing costs eat up a big chunk of your money every month. Even in retirement, the cost of housing will be your biggest financial burden.

Bringing an unpaid mortgage with you into retirement will cause a lot of financial stress each month.

The cost of homeownership for the average American household is $13,153 annually without the cost of a mortgage.

Based on my own calculations, Roman and I spend $28,400 a year on mortgage, insurance, taxes, utilities, and maintenance. It takes 25 percent out of our annual budget without the cost of home improvements and major repairs.

According to statistics, the average retiree household spends around $17,472 per year ($1,456 per month) on housing expenses including mortgage, rent, property taxes, insurance, maintenance, and repairs.

Pay off your mortgage.

You will make your retirement life a lot harder if you must continue to pay a mortgage when you are not working. Plus, you still have to spend money on property taxes, homeowner’s insurance, maintenance, and repairs.

The simple fact that you have lower housing costs means you will need less income to cover this essential expense. In addition, you will have more retirement income left for other retirement expenses.

Retirees often have to withdraw money from retirement funds to cover their mortgage payments. Unfortunately, those withdrawals typically trigger more taxes.

Look at your mortgage balance and figure out how much extra you can put toward your mortgage each month. Those extra payments can reduce your principal balance significantly.

Also, instead of sticking with the traditional monthly payments, you can start making bi-weekly mortgage payments.

Refinance your mortgage.

Another smart option to reduce your mortgage debt is to refinance it at a lower rate.

In 2020 Roman and I refinanced our mortgage with AmeriSave Mortgage Corporation at 2.5 percent. It helps us bring down our monthly payments and save up to $500 a month.

Unfortunately, not everyone can pay off a mortgage. Retiring with mortgage debt is becoming a more common scenario.

If you cannot afford to pay off your mortgage, you might consider selling your home.

Downsize your home.

Are you an empty nester? Then it might be the perfect time to reconsider your living condition.

The smart choice would be to sell your home and move to a smaller home or condo. By reducing your housing costs today, you can get extra cash into your pocket before you retire.

Look at the advantages of a smaller home or condo:

  • A smaller mortgage
  • Lower property taxes
  • Reduced homeowner’s insurance premiums
  • Fewer maintenance costs
  • Less yard work, especially if you get a condo

To help you get started, here are a few useful articles you may want to read:

  • 5 Tips on How to Downsize for Retirement
  • Rent or Buy in Retirement

2. Reduce transportation cost.

According to statistics, the average retiree household spends around $7,492 a year ($624 a month) on transportation.

The cost of transportation is likely to drop when you stop working. While you will not spend money on commuting anymore, not all your transportation expenses will disappear.

We all know that cars are expensive. Not only you have to pay for gas, maintenance, and repairs, but you also need to insure them. With inflation and gas prices going up every year it will make your life on a fixed income more difficult.

If you need a car, your goal should be to spend the least amount of money on a reliable car.

Here are a few options of how to reduce the costs of your vehicles before you retire:

Downsize your vehicles.

One of the best ways to reduce the cost of transportation is to downsize your vehicles.

If a large chunk of your income goes into maintaining several cars or driving luxury cars, I would suggest downsizing or choosing a different car. Going from two cars to one or downgrading to a less expensive car can help you significantly reduce the costs of gas, auto insurance, and maintenance.

According to LendingTree, the cost of a new car, including additional costs like fuel, insurance, and tires is between $23,903 (a small car) to $57,267 (a full-size car) per year.

However, if you have already paid off your car, it makes more sense to keep it as long as you can. That way, you do not need to worry about monthly car payments. Instead, you can take that money and use it to pay down any other debts or save more for retirement.

Buy a used car.

Many people choose to lease their cars because they want to have a new car every few years. Leasing works better if you are on the road for business and can deduct the lease payments.

But if you are near retirement, buying a good used car rather than a new one for the image will help you afford retirement sooner.

Most of the vehicles lose about half of their value by the time they are five years old. So, if you decide to buy a used car, a three-year-old car will cost you less in upfront expenses and maintenance.

Between paying on average $40,000 for a new car, you can save a lot of money by spending on a used car only $22,351(at the end of January 2021).

A useful post from LendingTree: Should I Buy a Used or New Car?

Use public transportation.

In case you are planning to move from the suburbs to an urban area, you should sell your cars and take advantage of public transportation.

In this scenario, you do not need to worry about the costs of your vehicles at all. Just buy a monthly public transportation pass. And when you want to go on a road trip, simply rent a car.

Use car-sharing services.

Most urban cities also have car-sharing services that give you easy and affordable access to a car for temporary needs.

Also, using services like Uber or Lyft can help you save money without the regular monthly costs associated with owning or leasing a car. With the gas prices are going up every year, you do not need to worry about that additional expense.

3. Get rid of a high-interest debt.

High-interest credit card debt can be one of the biggest burdens on your financial life in retirement.

Most of the credit cards come with high-interest rates – 18 to 20 percent.

credit card - cut credit card debt before retirement

If you carry a big balance on your credit cards, you will be stuck paying that required minimum every time your credit card bills come due.

Keep in mind, that if you bring a mortgage, high-rate credit card debt, and maybe a car loan into retirement, you will put a lot of pressure on your limited finances.

There are two most popular debt payment strategies:

  • The snowball strategy
  • The avalanche strategy

The snowball strategy – you are paying off debt from smallest balance to largest.

First, you focus on paying off the credit card with the smallest balance. Then you move on your next smallest credit card bill until all credit card debt is paid off in full.

The avalanche strategy – you organize your payments by interest rate – from high to low.

First, you pay off debt with the highest interest rate as quickly as possible (even with extra money). Then you move on to the card with the next highest interest rate.

I recommend focusing on your highest-interest debt first because the longer it takes you to pay it off, the more money you will pay towards interest.

And if you can help it, do not add any more debt to the pile while paying off old debts.

A helpful post:

  • How to Pay Off Debts Before Retirement

4. Review your insurance coverage.

Getting closer to retirement might be a good time to review how much you spend on insurance and how to cut that expense.

Life Insurance

First, you might look at your life insurance and decide if you still need it.

The main purpose of life insurance is to replace lost income. If your kids are grown and you no longer have any dependents who will need financial help after you die, it might be wise to drop policies. Paid-up policies can be sold.

If you have a term life policy, make sure you understand whether the payout at your death is worth the cost of the premium you are paying today.

Auto and homeowners’ Insurance

You might also look at your deductibles for your vehicles and homeowners’ insurance policies.

When you are still working, it makes sense to set your deductibles low. But low deductibles increase the amount you pay in insurance premiums. So, when you raise your deductibles, you will pay less for your vehicles and homeowners insurance premiums.

Once you retire, you might want to pay less for your insurance policies so you will have more money to cover your daily expenses.

Healthcare

In retirement many people will spend most of their money on health insurance, medical services, and drugs, as they age.

I my articles I often write about the cost of medical expenses in retirement. Because I want to remind my readers that healthcare is going to be their second biggest expense after housing, and they need to plan for it.

According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple may need around $300,000 saved (after tax) to cover healthcare costs in retirement.

Here is a helpful article you might want to read:

  • How to Plan for Rising Healthcare Costs

Most people will be eligible for Medicare at age 65. But if you plan to retire before age 65, you will need to find a separate plan to cover your medical expenses.

Individual health insurance is expensive and could cost more than $1,000 a month. Make sure to shop around for the best prices.

Even being eligible for Medicare brings its own set of challenges because it does not cover all medical expenses.

Medicare is not free. It does not cover premiums, deductibles, co-pays for doctor visits, dental and vision care, long-term care, personal care, and other expenses.

Long-term care insurance is the most recommended way of planning for future expenses.

Long-term care insurance will help you not be a financial burden on your family if that time comes. It will cover nursing homes, assisted living facilities, and in-home care.

After all, you do not want to leave your husband or wife with nothing because the entire nest egg was spent on taking care of you.

Final Thoughts

If you do not know what your expenses look like in retirement, it will be difficult to predict how much money you need to save for the future.

But if you can get a sense of what to expect, it will be relatively easy to cut your expenses in these categories before you retire.

Have you had more ideas on how to cut expenses before retirement?

If you enjoyed reading, share this post so that others can find it, too!

Filed Under: Money Management, Retirement Expenses, Retirement Planning Tagged With: healthcare costs in retirement, reduce retirement expenses, retirement, retirement budget

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Hi, I'm Maggie. Welcome to Save, Invest & Retire! I am on a mission to help baby boomers learn how to save & invest smart. Follow me on detailed information about retirement planning, travels, and living the life of your dreams.

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