By the year 2030, it is expected that the number of citizens in the US to reach retirement age will be around 70 million. Retirement is that stage in your life when you’re supposed to live a comfortable, more relaxed pace of life – but it does not mean that your expenses will follow suit. Cut expenses after retirement and only spend money on essential things: we’ll tell you how!
Naturally, you need to have funds to survive on during retirement since you will not have regular income from work anymore. Although most would-be seniors invest in a suitable retirement fund and get the benefits that they usually receive from work, factors like inflation and the lifestyle that they would like to live factor in on how the expenses would be managed post-retirement.
Let’s say that you are almost 60 years old but you managed to get an extended two-year period at a company that you loyally worked for during the past decades. If you will get a sufficient post-retirement income from the company in addition to the pension that you will receive from the government, then you can easily fulfill your dream of getting a retirement home on a beach, for example.
On the other hand, if you saved up for retirement a bit too late, you might find yourself scrambling for ways to boost your income or worse, be forced to work for a few more years so that you can have sufficient funds once you finally get off from the workforce. Simply put, your finances after retirement will depend entirely on how early on you saved up for it, and the lifestyle that you are envisioning for yourself during your retirement years.
What Are the Best Ways to Cut Expenses after Retirement?
If you are already a retiree or are about to retire in a few years, here are the best ways to cut expenses after retirement:
1. Know how much you need to have a comfortable retirement
By now, you should have heard this advice a million times over: the earlier you save up for retirement, the better off you will be. To give you an idea about how much you should be saving up for your golden years, here’s a rule of gold to follow. You should consider setting aside 50% to 70% of your current income and multiply the result by 20.
On average, people live 20 years on after they retire – more if you have a pretty healthy lifestyle. Of course, the bigger your retirement money is, the more comfortable a lifestyle you can lead.
2. Take steps to care for your health
One of the biggest mistakes made by senior citizens when trying to cut expenses after retirement is underestimating their health care expenses. In a survey conducted by Fidelity, almost half of pre-retirees who are between the ages of 55 and 64 think they would only need $50,000 for their health care costs. However, the company estimated that the average 65-year old will require $220,000 to cover their health care expenses through a lifetime.
This is not yet considering the long-term care for those who will outlive their peers, or those who need almost round-the-clock care due to certain illnesses. As such, you should take steps to care for your health as early as today so that you won’t have to deal with higher-than-usual health care costs post-retirement.
3. Look for the best Medicare plan
Even if you are pretty satisfied with the Medicare plan that you currently have, it pays to do a review of your plan on an annual basis.
Most plans raise premiums on an annual basis or restrict their network coverage. The plan that you have now may turn out to be more expensive than you expected by next year, so always conduct a review.
Most plans can be changed from October to December which is the open-enrollment season. If your goal is to switch to the all-in-one Medicare Advantage plan, you are allowed to do that any time of the year.
4. Cut back on medication-related costs
If you have an existing medical condition, ask your doctor to prescribe generic instead of branded medication. About 25% of a retiree’s health care expenses come from the cost of prescription drugs, and generic alternatives will easily save you half of the branded medication’s price – and they work just as well. Plus, you really need to cut expenses after retirement!
5. Have a long-term health care plan
Should you need long-term care in the future, a private room at a nursing home can easily set you back $84,000 per year. This does not yet include the cost of hiring a home health aide, the medication and the special diet that you might need during your stay at the nursing home. Check on the coverage offered by Medicare and Medicaid so that you can prepare for such eventualities.
6. Boost your post-retirement income with tax-free savings
After officially retiring from work, you would not have a source of income anymore. However, you can build a tax-free stash of savings by contributing premiums for your Medicare Part B, Part D or the Advantage plan.
Those who have high-deductible health insurance policies can make tax-deductible contributions for individual or family coverage to a health savings account and cut expenses after retirement this way. Ask your Medicare representative about your options for this.
7. Downgrade your home
When you reach retirement age, the kids would have moved out and you might be living in your house alone or as an elderly couple. Two-thirds of retirees would rather remain in their hometown than move someplace else, but you do not necessarily have to move away just so that you can downgrade the expenses.
If you want, you can lease half of your house to cut expenses after retirement. Or, you can sell the house and move into a smaller home. Just make sure that it has access to nearby health care facilities as well as other items that you would need in case you fall ill or get injured.
8. Consider paying off your mortgage
Eliminating your mortgage takes a huge load off your finances. Once your house is all paid off, you can simplify your life by moving to an area where the cost of living is lower. Although there are still the taxes and maintenance costs that you have to pay, it will still be a fraction of what your monthly mortgage payments used to be.
9. Consider selling your vehicle
When you were still a working couple, you might have required two cars to get yourselves to and from work. Once you reach retirement age, you can sell all the other vehicles that you have to save money on gas and car maintenance. If you moved into a senior community where public transport is easily accessible, you can even go completely careless.
10. Determine if you still need those insurance policies
When you were at that stage in your life that you are raising a family, you would be paying one insurance plan after another. After retirement, you might decide to sell your house and move to a retirement home, so your home insurance is not needed anymore.
If you decided to go carless, you can eliminate car insurance premium fees. If you do not have kids who are financially dependent on you, you might also consider eliminating that life insurance policy.
11. Avoid retirement penalties
If you have a retirement account, make sure to withdraw your funds on time to avoid early or late withdrawal penalties. Other instances when you might be charged with retirement penalties are signing up for Social Security early, as well as delaying signing up for Medicare Parts B and D. Such penalties can be avoided anyway, so why pay for them at all?
12. Save money on food and other purchases by using coupons
According to the US Department of Agriculture, about 25% of the food that Americans purchase goes to waste. If you’re an elderly couple, you might not necessarily need a stocked fridge or pantry, especially if you do not eat that much. Cook just enough portions of your favorite dishes, store leftovers efficiently and make them your lunch, dinner or next morning breakfast.
Eliminating food wastage is the best way to save money on food. When buying food supplies and making other purchases, take full advantage of the coupons that you can get from the Sunday paper or magazines. If you’re tech-savvy, you can also download coupons online and use them on purchases or services.
13. Take full advantage of senior discounts
When you’re a senior citizen, you are entitled to discounts at movie theaters, cultural shows, museums and restaurants. Take full advantage of them to cut expenses after retirement.
14. When travelling, do it during off-peak times
If the life that you imagined as a senior is to travel the world, do it during off-peak times. You will save a lot of money in the process, and get to live your dream of exploring new places during your retirement years.
15. Live a clutter-free life
If you’re willing to live a clutter-free life, you can save a significant amount on living expenses as a retiree. Get rid of the things that you do not need anymore and make it a rule to simplify your life. This does not just lower your expenses, but also make your life clutter-free in general.
Apply all these little ideas to your everyday life and cut expenses after retirement as much as possible, so that you are in control of every little penny!