6 Ways the Middle Class Should Consider Downsizing in Retirement
Written by
J. Arky
Edited by
Carly Brashears
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Looking ahead toward your retirement, you might have different goals and strategies in mind when it comes to how to best make your money stretch. After all, retirement does not look the same for everyone, especially those in the middle class.
If you find yourself in that tax income bracket, you aren’t alone. There are lots of ways that you can downsize as a frugal retiree, but if you are looking for specific ways to do it while being middle class, you are in luck. GOBankingRates got some expert advice on the ways the middle class should consider downsizing in retirement.
Rethink Healthcare Costs
As you get further into retirement, you might find that you are spending a lot more money on your health than you did while you were working. For the middle class, that can put a strain on the household budget, so best to prepare ahead of time.
“Healthcare is a critical factor in retirement planning, often representing a significant portion of retirees’ budgets,” cautioned Brandy Burch, the CEO and co-founder of Benefitbay. “As part of downsizing efforts, middle-class retirees should consider transitioning to health insurance options that better suit their current needs and financial situation.”
“Evaluating and adjusting health insurance coverage can lead to considerable savings and ensure that healthcare expenses do not become a financial burden,” Burch concluded.
Renting vs. Owning
You might currently own your home — whether you are still making payments on your mortgage or you have paid it off. Either way, it takes money to keep up the ownership of a home. Maybe it’s time to consider putting that money to rent where you can downsize to a place that fits your needs while adding a little more to your budget.
Michael Benoit, the owner and founder of Contractor Bond, said “…owning a home can be expensive, especially in retirement when you are living on a fixed income. I suggest considering renting instead of owning a home to eliminate the financial responsibilities of homeownership, such as property taxes, repairs, and maintenance. I have found renting [has] more flexibility and less stress in retirement.”
Moving To a Smaller House
Perhaps you like living in a home, but the one you are currently in is too big and doesn’t match your lifestyle like it did in the pre-retirement days. You can still have a home, but try getting a smaller one if you can.
“If you do decide to continue owning a retirement home, consider downsizing to a smaller house,” Benoit said. “This reduces your monthly mortgage payments, property taxes, and utility bills. Well, a smaller house means less space to maintain and clean, making it easier on your budget and physical abilities.”
“For many, this means downsizing their home to reflect their current needs and reduce living expenses,” said John Crist of Prestizia Insurance, speaking on the topic of how to retire in the middle class. “This not only lowers mortgage or rent payments but can also decrease utility, maintenance, and insurance costs.”
Part-Time Work
Once you retire from your career, you do not have to stop working. In fact, many retirees find that the best way to fill the golden years is to have a job to look forward to, whether it be volunteering without pay or community service. But if you need some extra cash to ensure your bills are paid each month, why not consider some part-time work or gig jobs?
“I highly recommend exploring part-time job opportunities or freelancing gigs to supplement retirement income and maintain a sense of purpose,” Benoit said. “This is helpful to cover unexpected expenses or allow you to save for future travels and leisure activities. For instance, you can look into tutoring, consulting, or pet-sitting as part-time options.”
Refine Your Finances
You might need to take a look at the money you have and figure out smarter solutions for investing in your future. While you were working, chances are you had a pension, 401(k), retirement plan or were just saving some extra money with each paycheck. Now it’s time to redefine your finances as a middle-class retiree.
“One technique that has shown significant savings for our clients involves shifting investments into more tax-efficient vehicles,” said Philip Wentworth, Jr. of Rockerbox Tax. “For example, moving funds from taxable investment accounts into Roth IRAs where withdrawals can be tax-free in retirement. This move not only reduces the retiree’s taxable income but also offers a more predictable financial landscape in their non-working years.”
Chop Expenses
Your household budget and cost of living while you were working can look very different in retirement. Do you need to spend money like you used to? Are there ways to get rid of expenses that are putting a strain on your finances?
“…scrutinizing and reducing everyday expenses plays a crucial role in downsizing for retirement,” Wentworth said, pointing to things like monthly subscriptions, memberships and recurring bills to identify areas where retirees can scale back.
“For instance, switching to a more cost-effective insurance plan or reducing discretionary spending can free up funds that are better allocated toward essential expenses or savings,” Wentworth said.
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