retirement lifestyle

Is Renting a Better Option in Retirement?

street in small town - rent or buy in retirement

When the kids are gone, you might start thinking that your four-bedroom family home feels a bit too large, not to mention a money drain. Probably you need less space, and you want someone else to take care of it. But now you need to decide if you want to buy or rent.

Owning real estate is a big part of the American lifestyle. However, ownership is more expensive than most people realize.

When you are getting closer to retirement it may be more important to secure income from your retirement portfolio than to drop money into a new house.

Besides making a financial decision, you need to think about how it will fit into your new lifestyle. Do you love to own your place and fix it up the way you want it? Or it will be a big relief not to worry about yard work, broken faucets, or a water heater?

If you’re getting closer to retirement you might already have an idea how you want to spend your days. Buying a condo by the water or on a golf course might fit your retirement lifestyle perfectly. Other people would prefer to sell the house, cash out, and spend money on travel. So, renting would be a better option for them.

How to figure out if you are better off renting or buying?

Factors to consider as you decide

When deciding whether to buy or rent, calculate how much is your retirement income and then how much income you will need to pay the bills.

Keep in mind that the housing cost is the biggest category in your budget. Then you should look at the home prices in your new location and compare it with the yearly rent in the same community.

Here are some key factors to help you with your rent or buy decision.

Renting in retirement:

Whether you want to rent a smaller house or a downtown condo, you need to decide what you want out of a rental. And again, it will depend a lot on financial and emotional matters.

The upside of renting

Your money is not tied up. Owning a home in retirement is not always financially wise. If renting is cheaper than owning, you’ll be better off investing your retirement funds and letting it grow.

It can increase your retirement income because investments often grow at a faster rate than real estate. The only money you tie up is your security deposit. With the fixed cost of rent and no taxes or insurance, you can have enough cash for travel, activities, or charity.

For example, you sell your house and get the sale proceeds worth $500,000. If you decide to rent, you can have that money invested. Assume a 5 percent annual return on your investments or $25,000 which means a monthly return of $2,083 ($25,000:12 = $2,083).

If you can rent a comparable home for that price, you would be well financially without the hassle of ownership.

No maintenance, renovations, or repairs. When you became a tenant, you hardly had any responsibilities, besides paying rent on time.

So, when the water heater needs to be replaced or the faucet leaks, you just pick up a phone and call the landlord. You do not need to worry about the upkeep of the rental building or any repair costs. You can spend time and money on things you like to do.

Less space and more amenities. As a retiree, you do not need a big car to drive kids around and you do not need a third and fourth bedroom when it is just one or two of you.

You are more likely to want a pool or gym somewhere on the property, and a janitor who will fix a leak and take care of the yard.

In general, rental units in apartment buildings or condominiums tend to be located closer to town centers. You can walk to the coffee shop, museum, library, or the bus stop a block away from your place.

Lifestyle flexibility. Lifestyle flexibility is a key advantage to everyone who rents. For retirees, flexibility means having the option to move to be near children, grandchildren, or family members. The other option is to spend different parts of the year in different places or abroad.

When you need a change in your life, moving out of a rental can be much faster than moving out of the house. Landlords cannot stop you from moving out even though it may be a fee for breaking a lease.

You do not have to worry about selling or renting out your home. On the other hand, selling a house can take months sometimes years, depending on your house conditions and the local housing market.

The downside of renting

Annual rent increases. Usually, rents go up every year. When you own a home, your mortgage is a fixed payment, and you can only expect an increase in taxes and insurance. While renting, you could expect a 3 to 10 rent percent increase every year.

Unfortunately, you do not build any home equity with every payment. Besides, when the real estate market is booming and prices are going up, you do not get any appreciation as a renter. Your landlord builds equity and gets all appreciation from the rising real estate prices.

No feeling of security. Dealing with a landlord is not always easy. Your landlord can decide at any time to sell the place, force you to end the lease, and find another place to live.

Inconveniences of renting. Renting a place might include many inconveniences. You will need to get permission from a landlord or property manager if you want to re-paint or decorate your place.

Some rentals do not permit pets or have a strict pet policy. You might deal with issues like noisy neighbors, poor maintenance, shortage of parking places, and more.

Owning in retirement:

When you start thinking about downsizing you need to decide whether homeownership or renting makes the most sense for your situation. Like any decision, it will depend a lot on emotional and financial issues.

The upside of homeownership

Sense of stability. Homeownership gives you a sense of security and stability. Many people feel safer knowing that they own their home. There is a sense of security in knowing that this is your home, and nobody will kick you out of it.

Furthermore, you do not need to worry about a landlord bumping up the rent or starting a major renovation and asking you to move out.

Fixed mortgage payments. Many retirees worry about mortgage payments and how to afford them in retirement while living on a fixed income. But if your mortgage is paid in full, you will only need to pay property taxes and insurance.

However, if you still have a mortgage and have to make mortgage payments every month, it will come as a fixed payment.

Home equity. There is another important advantage of homeownership – building equity. With every mortgage payment, you accumulate more home equity. Then if you need it, you can take a home equity loan, line of credit, or even a reverse mortgage.

Increase in value. Everyone knows that housing prices are going up. In many popular places, you can see a significant increase in value if you own a home for 10 or 15 years.

Control over updates or improvements. If you own your home, you can make any kind of improvements or renovations without asking the landlord’s permission. The same comes with pets. There are different kinds of policies and restrictions on what kind of pets are allowed in rental buildings.

The downside of homeownership

Your money is tied up. If you decide to buy a house or condo in retirement you will be using a big chunk of money for a down payment or paying full price in cash. Your money will be tied up in that home for a long time.

Think about where the money will come from to pay your housing expenses. Keep in mind that the insurance, taxes, and upkeep of the house go up every year.

Also, it is going to be harder to get a mortgage when you retire because you do not have an income. So, if you consider buying a home, make sure to do that before you stop working.

The costs of repairs, maintenance, and renovations. We all know that owning a house means repairs, maintenance, and yard work. It could cost thousands of dollars if you need to replace the roof or your heating system. Maintaining the house and the yard takes time and money.

Moreover, you might want to renovate your new home and make it more personal. But it could be expensive when you live on a fixed income.

Hard to sell. Your home is a real estate investment and real estate is not considered a liquid investment. It cannot be quickly converted to cash like stocks or bonds. As a result, it is hard to sell when you need money.

There are a lot of tradeoffs between renting and owning. There is no right answer for everyone. You have to decide what fits your lifestyle and cost of living.

7 Things People Like Most About Retirement

by Maggie Leave a Comment

a couple running on the beach -things people like about retirement

If you are in your 50s or 60s, you are probably looking forward to retirement with eagerness and anticipation. Because retirement is a well-deserved reward that you have earned with decades of hard work.

But perhaps you are unsure about what retirement will be like. It is common to feel uncertain about whether you will be happy or not after you stop working. There are many reasons people love being retired.

Here are 7 things people like most about retirement.

1. The Feeling of Freedom.

Most retirees appreciate the feeling of freedom. There is no pressure, no stress, and no problems. You do not need to worry about your career path, getting kids into college and paying for their education, or keeping up with your neighbors.

Also, retirees love not having work-related stress in their life. You do not have to set up an alarm clock if you don’t want to. You can move to the city or another country. You can do something or do nothing. Or you can do what you want where you want.

You may find that you enjoy having a slow morning routine because you don’t have to worry about getting up early for work and rushing out of the house. You may discover that you enjoy the late-night TV shows that you couldn’t watch when you worked. Or you like to go for a walk late at night when it is calm and peaceful. It is your choice to spend the days the way you like it.

2. Having No Rush in Life.

After spending decades working and building their careers, most people appreciate that there is no rush in their life. Finally, you have time to enjoy the pleasure of a simple life.

It could be sitting outside in your backyard, enjoying a morning walk, or just having time to spend with your family. Many retirees find that the simple things in life are the most rewarding.

If you do not have to rush anywhere it is easier to be spontaneous.

If you feel the urge to get out of the house and do something different than your everyday routine, then do it. It is a beautiful day, and you feel like postponing your chores and spending time outdoors. You can sit on a deck with your morning coffee and a good book or take a walk in the park.

And if you want to take a day trip then go for it. If your friend invites you to get together, you can more easily say yes.

3. Control of Your Own Time.

Being in charge of your own time is a dream coming true for many retirees.

During a busy career, you get used to living by other people’s agenda. You have your company agenda, your boss, your clients, etc. There is little time left for your own agenda in life. That is why having your own schedule, not someone else’s, becomes an important part of retirement life.

Mornings without an alarm clock. Days without a boss or deadline. A simple life. Being able to do anything at a slower pace often brings joy in retirement. If it doesn’t get done today, there is always tomorrow. You have more time for yourself and get to do the things you might enjoy doing without being rushed.

You can run errands mid-day or in the evening when the stores are less crowded. You can schedule doctor’s and dentist appointments in the middle of the day when they are more likely to have available times.

4. Being Free of Money Worries.

The fear of running out of money in retirement is still a hot topic on many retirement websites. Even though many retirees worry about outliving their retirement savings, there are still many others who feel financially secure.

While you are working, you enjoy a regular income from your job. Many people become accustomed to a high standard of living without much focus on spending. However, when you retire, the amount of money you have available will change. So, you have to adjust your spending habits accordingly.

It would be a smart idea to create a new retirement budget and monitor your finances together with your spouse. When both spouses understand their financial situation and agree upon boundaries, there is no conflict over money.

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5. Time to Travel the World.

Everyone has a different idea of their dream retirement. Some people anticipate years of travel and adventure, while others are envisioning staying home and relaxing or gardening and playing golf.

However, the most common retirement dream is to travel the world.

Retirement is the time in life when people decide they are finally ready and able to travel. With more free time and often more financial freedom it is easy to start exploring the world and live a more adventurous lifestyle. People like to make a retirement bucket list with the destinations they want to explore and things they want to do in retirement.

Helpful articles:

6. Time to Explore New Activities.

During working years, you have limited time for activities you truly enjoy. But after you retire, you will have much more time to spend on interests that bring you a sense of fulfillment.

Sitting on a couch and watching Netflix will not fit the profile of a dream retirement.

The happiest retirees know how to stay active and engage in hobbies and activities on a regular basis. It does not really matter what your hobbies and activities are. It might be hiking, swimming, or biking. It might be painting, playing a guitar, or photography.

The one thing that matters is that you feel passionate about your interests, and you make them a part of your daily routine.

After you retire, you will have more time to read and learn. You will have time to take classes, visit museums and art galleries, or read and learn new things. Best of all, you can explore the topics that truly interest you. And you can take courses or classes and not have to worry about being graded.

And whether you prefer hiking, biking, going to the gym, or playing golf, you can do it on weekdays when the crowds are lighter. You have more flexibility to adjust your schedule when you are not working.

7. Quality Time With Loved Ones.

While you work, you and your spouse have limited amounts of time to spend together, especially if you have children.

After you retire, you are going to be around each other most of the time. This may require some adjustments. You will probably need to work together to design a daily routine that satisfies both of you.

Also, you may need to find common ground on how much you will spend together and apart. You will probably discover there are some things you enjoy doing together and others you do not. You should agree upon how much time you will allow each other to enjoy your personal interests.

But it is so easy to take your time together for granted. At least once a month treat yourself to a special night out or share an activity that you both enjoy.

Spending time with their grandchildren is on the agenda for many retirees. They wanted to make up for the lost time with their grandkids because they were too busy working.

Also, many did not have enough time to enjoy the young years of their own children due to their jobs and busy schedules. Thus, they are looking forward to retirement as the time to spend more time with the family.

Having the time to be available for family members when they need help is what people love about retirement.

Takeaway

You may be surprised at how many of your friends will comment that you look happier and more relaxed after you retire.

While it is true that retirement brings some challenges, your life will change in many ways. But overall, retirement represents a wonderful chapter of personal freedom, relaxation, and fulfillment. Go ahead and look forward to the benefits and opportunities that will be yours when you have control over your life and your time.

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6 Ways to Fund Retirement Lifestyle with Home Equity

by Maggie Leave a Comment

an elderly couple on a sofa-home equity funds retirement lifestyle

Do you know that your home is your biggest financial asset because of the home equity?

Over the years, your home has provided a haven for living your life. But it also has become your largest financial asset that increased in value. For many future retirees, home equity will be the biggest asset to fund their retirement lifestyle.

If you are getting closer to retirement, you need to plan how to maximize every asset you have. Your home can give you a huge financial advantage, especially if you have built up your home equity significantly.

When you retire, that money can be converted into retirement income, cash for everyday expenses and hobbies, or financial leverage for long-term care. No matter where you decide to live in retirement, the sooner you consider how to handle your real estate assets, the better prepared you will be.

What is home equity?

Home equity is a portion of your property that you ‘own’. When you purchased your home, you probably paid only 10 or 20 percent as a down payment and borrowed the rest of the money from the bank. Even though you are considered a homeowner, the bank owns the portion of your home until you pay off the loan.

How home equity works.

Home equity is the market value of your house minus what you owe. For example, the current market value of your house is $650,000, and you have a remaining mortgage of $250,000. Thus, your current home equity is $400,000 and this money belongs to you.

$650,000 – $250,000 = $400,000

When the prices are rising, your home goes significantly higher in value. So, you will build equity without any effort on your part. For example, if your home value has grown from $650,000 to $700,000, you will get more equity in your home.

$700,000 – $250,000 = $450,000

You can increase home equity by paying down your mortgage and/ or taking steps to increase market value through home improvement projects.

How to use home equity to fund your retirement?

If you decide to use your home equity, there are several ways to put this asset to work. But before deciding how your home can help you live the life you always wanted in retirement, calculate how much equity you have and whether your mortgage is paid off.

1. Downsize: trade your existing home for something smaller in size.

Selling your home is the most direct way to unlock the equity you have built in your house for decades. Keep in mind that downsizing can save you 35 percent or more on future housing costs.

Moving from a sprawling 3,500 square feet family home to a 1,000 square feet condo will help you reduce your cost of living. Because less space means less money, less maintenance, and less hassle. And the smaller the space the easier it will be to furnish and decorate.

You can spend the saved money on something more important such as travel, hobbies, and time with your family. After all, a smaller space has more value not only for your wallet but for your lifestyle.

The important thing to remember is that if you do not have enough money saved for retirement, downsizing will help you get extra cash to fund your retirement years.

For example, you carry a $100,000 mortgage. If you want to sell your home for $600,000, then downsize to a $350,000 smaller home or condo, you might walk away with a nice profit. Furthermore, you can buy your next smaller home with cash, without having to take out a mortgage.

High mortgage rates can be a problem.

If you have a mortgage on your current home with a low-interest rate and are looking to downsize and borrow money for your next home, keep in mind that the rate you can get will be much higher than your existing one.

Mortgage rates remain high in a current market. And they are highly unlikely to return to the rock-bottom levels of 2020 and 2021. If you are planning to finance your new home, it will be significantly more expensive than it was a year ago.

If you are already retired and live on a fixed income, downsizing will give you some significant savings down the road. But you have to compare it with how much interest you will pay over the time of the loan.

Furthermore, qualifying for a mortgage might be a problem if you are not working. Keep in mind that most mortgages are issued and approved based on your income and not on your assets. If you are not working, it will be harder to get financing because you cannot show the constant stream of your income.

2. Trade your existing home for something less expensive.

Another way to use your home equity is to sell your home and relocate to a more affordable place.

Relocating to a place with a lower cost of living will help you reduce your monthly expenses and stretch your retirement savings. Moreover, if you live in an expensive town, you can sell your home, buy a much nicer house in a cheaper area, and still have a big chunk of cash to live off.

By moving to a less-expensive area, you will have more funds for travel, hobbies, activities, etc. And if your home is fully paid-off, it can free up money for the purchase of a less expensive home and perhaps a mortgage-free lifestyle.

But be honest with yourself. When you consider using your home to fund your retirement, figure out if starting a new life in a different place and a new location is for you.

3. Sell your existing home and rent.

Some people like the idea of selling their current home first, giving them the option to rent while deciding where to buy the next one.

There is a long list of pros and cons whether to rent or buy. However, there are still many good reasons to rent when you retire. One of the main reasons for you might be to increase your retirement funds. So, if you decide to sell your home and live on rent, you can stretch your retirement savings for longer.

Renting for a long time is not an ideal solution. But not everyone has a clear idea of what they want right away. So, you might want to rent temporarily and live in several places before purchasing a home.

4. Think outside of the box: sell your home and move abroad.

Retiring outside of the US has become a popular option among many baby boomers. A big reason is that many baby boomers didn’t save enough for retirement or their retirement nest egg lost value and never recovered.

When choosing a retirement destination, it is important to find a country where the cost of living is low enough so you can stretch your retirement savings.

It is hard to imagine that many baby boomers can afford to retire in Italy or France. These countries are rich in culture, history, and art, but they are not cheap. However, countries like Ecuador, Mexico, Costa Rica, or Panama can offer American retirees a low cost of living, reliable healthcare, and a decent public transportation system.

Moving abroad is not for everyone. But if you are looking for adventure in your golden years, you can live a more pleasant and comfortable lifestyle at half of the cost than retiring in the US.

Other alternatives to downsizing.

5. Get HELOC or a home equity loan.

There is a proven fact that most people would prefer to stay in their homes and retire in place. They want to remain in their neighborhood for life. In this case, homeownership might provide several options to fund your retirement without the risk of stock market investments.

If you need extra cash but do not want to sell your home, you can apply for a home equity line of credit (HELOC) or a home equity loan (lump sum). Both options will allow you to borrow up to 80% of your home’s equity. Closing costs with both can be cheaper, and you can get a repayment term as low as five years.

But if your home is paid off, any kind of loan means that you will have a new mortgage on your home.

Before taking any concrete steps, analyze your current and future finances. Calculate what your income is likely to be and the sources of that income.

6. Get a reverse mortgage (HECM).

If your home has gained a lot in value, look at the numbers and see if it might be cheaper to stay put and take out a reverse mortgage.

A reverse mortgage is also known as a home equity conversation mortgage (HECM).

There are many benefits of getting a reverse mortgage. It provides you with regular income and does not require monthly payments. You still have to pay taxes and home insurance, and you will be responsible for maintenance. The best part is that you will receive a portion of your home equity in cash without requiring you to move out. However, the loan has to be repaid when the owner leaves the house.

A reverse mortgage can be flexible, and you can take HECM as a line of credit (HELOC), lump sum, or annuity.

One option is to use HECM for your medical or long-term care expenses late in life when you run out of money. Another option is to set up an annuity to increase Social Security and any other retirement income you will receive.

Reverse mortgages can be complicated. There are many terms and conditions, and it is a relatively expensive way to borrow money. Before going this route, do your research to understand all the pros and cons, and talk to a loan specialist.

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25 Practical Tips for Retirement Travel on a Budget

by Maggie 4 Comments

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 2 Comments

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.

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