Stretch Retirement Savings: Experts Recommend 5 Expenses To Cut Easily
A traditional, passive retirement is fine for some, but many retirees are looking to start exciting new chapters of their lives when they stop working.
As noted by Fidelity, new retirees should plan on spending between 55% and 80% of what they were earning while still working every year in retirement and increase it by around 6% if they envision an active lifestyle or costly expenditures.
“Each family’s retirement situation is different,” said Beau Zhao, director of Financial Solutions at Fidelity. “The amount of time until you retire, spending habits, travel plans, health conditions and unexpected costs can all vary dramatically. That is why it is important to adjust the spending guidelines based on your own needs and wants.”
Unless you have been ultra-successful in building a nest egg, saving and budgeting doesn’t stop when you retire. Living your ideal life in retirement will still require checking your bank balance and cutting expenses along the way. Here are five easy expenses you can cut to stretch your savings in retirement.
1. Transportation
Spending money on transportation is likely to decrease when you stop working. Selling one or more vehicles that you don’t need can be a financial boon in retirement and will significantly save you gas money, insurance and maintenance.
Depending on how socially active you plan on being and what transportation options you have at your disposal, switching to a reliable, cheaper option should be a savings goal. There may not be a point in keeping a car whatsoever.
Senior citizen discounts are everywhere, so it makes good sense to use a senior public transportation pass to get around town. Depending on the frequency of your trips, Uber or Lyft might be enough without you having to bear the cost of regular vehicle expenditures.
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2. Housing
Similar to giving up or reducing driving during retirement, letting go of the family home is something many struggle to come to terms with during their twilight years. While one is a matter of safety and pride, the other is a sentimentally stressful decision — but a wise personal financial one.
Whether one is downsizing on square footage, becoming mortgage free or moving to a cheaper area, trimming housings costs can have a tremendous impact on savings during retirement.
3. Medical and Insurance Services
A harsh financial reality of aging is the inevitable healthcare and insurance costs that come with it. Retirement is a time to break free from a lot of restraints, and this can include payment plans for all the services one requires. As U.S. News & World Report claims, many people stay with health and insurance policies they have had for years out of convenience.
Providers make a lot of money off people content to pay what they once did, for the rest of their lives. At all times, you should be considering what you are paying and what you need. If you find you are overspending on healthcare, figure out what which Medicare package or private policy makes the most sense for you.
According to Jordan Sowhangar, a wealth advisor at Girard, re-evaluating life, home and auto insurance policies and looking for discounts can save you thousands a year.
As far as life insurance is concerned, Sowhangar told U.S. News & World Report that retirees with grown children and/or no mortgage should think about whether a policy is needed at all. “Maybe it makes sense to stop paying premiums, maybe lower the death policy and save on the premiums,” he suggested.
4. Dining Out
Eating is a necessity, but it shouldn’t be breaking your budget. Dining out is a luxury expense and a comfortable habit many develop in retirement. Speaking to Business Insider, retiree Nicole Carter couldn’t get over how much she was spending on food outside the home while saving for retirement.
“When I actually took a look at my finances and realized that I had spent $2,100 on eating out, I had to give myself a check-in,” she said.
Decades of daily cooking might have lost its appeal for some, but for others, retirement is a time to learn and hone culinary skills while saving money through entertaining and spending more time trying new dishes out in the comfort of their kitchens.
5. Impulsive Shopping
Lectures on “discretionary spending” are inescapable in this time of high inflation and consumer prices. However, it’s not just idle talk. Impulse spending, especially larger purchases like vacations and new electronic conveniences, have a tendency to bite your budget big time.
As James R. admitted to Business Insider, “American culture is frenetic, and it’s consumer-oriented. Think twice about whether or not you really want to be that person. If you can deviate from it, it makes life in retirement a whole lot easier.”
Leaning on discipline and taking a prudent approach of saving in retirement will serve you better throughout your later years, especially as the economy improves.
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