Are you going to spend less after you retire, or will you spend more? That may seem like an odd question: conventional wisdom suggests that retirement living is almost always cheaper than pre-retirement living. But many people find their experience defies conventional wisdom, and that suggests to us that it’s essential for most retirees to find ways to live well on less money. Is that really possible?
Spending Less: Retirement Can Be Expensive
We just discovered this article on the Motley Fool website, and we found it encouraging, especially at a time when we’re faced with a barrage of reports warning how poorly prepared most Americans are for retirement. The article promises “Five Ways to Lower the Cost of Retirement.” Naturally we were intrigued. “Worried about not having enough money during your golden years?” asks the Fool. “Here’s how to get away with spending less.” But before we share these timely tips, it’s important to put the so-called “retirement crisis” into perspective. “Retirement is an exciting period of life to look forward to, but it can also be an expensive one,” the article warns. “In fact, nearly half of older households wind up spending more money, not less, during their first two years of retirement.”
To confirm that statement we went back a few years to this Motley Fool article from 2017. “There’s a reason we’re told to save independently for retirement and not rely on Social Security alone,” that article explains. “Typical retirees need 70 to 80 percent of their former income to pay their living costs once they stop working. And since Social Security will only replace about 40 percent of the average worker’s pre-retirement income, it’s up to us, as individuals, to fill that gap.” But the gap may turn out to be bigger than anticipated. Data from the Employee Benefit Research Institute (EBRI) found that nearly half of households spent more money, not less, during their first two years of retirement. Even after six years of retirement, one-third of households were still spending more than they had when still working. Some of this spending, says the Fool, is discretionary – entertainment, travel, and the like – but much of it, especially medical expense, is not. “If we don’t save enough to cover those costs, a lot of us will be headed for trouble,” the article warns.
Spending Less: Five Ways to Cut Costs and Still Live Well
With that sober assessment in mind, let’s go back and take a look at some ways to cut retirement expenses and still enjoy a rewarding lifestyle. “If you’re worried about running low on cash during your golden years,” the more recent Motley Fool article says, “here are a few things you can do to reduce your retirement costs and alleviate that concern.” We like these ideas because they appear practical for many of us, and it seems to us that they could actually make a difference in one’s sense of personal financial security. Here are the five suggestions:
- Pay Off Your Mortgage: More seniors than ever are carrying mortgages into retirement – as many as 41 percent, compared with 21 percent in 1989. “But if you manage to pay off your mortgage in time for retirement, you’ll have one less major expense to worry about,” Motley Fool If retirement isn’t imminent, many planners advise that you make it a priority to pay down the home loan as quickly as possible.
- Downsize: “Generally speaking, it costs less to maintain a smaller living space than a larger one,” the article says. “If you’re sitting on square footage you no longer need (say, because your children have all grown up and moved out), then it pays to consider downsizing in retirement.” A smaller home usually means a smaller mortgage, lower rent, lower property taxes, and less expensive upkeep and utilities
- Move to a Place Where You Don’t Need a Car: According to the Fool, the second largest expense for Americans 65 and over is transportation. The Bureau of Labor Statistics says the typical senior spends $6,814 a year just to get around. “If you’re able to retire someplace that doesn’t require you to have your own vehicle, you might reduce that expense tremendously. Therefore, take a look at walkable cities, or those with extensive public transportation systems.” Many seniors are starting to use ride-share services like Lyft and Über to avoid the expense of car ownership.
- Stop Outsourcing Home Maintenance Tasks: When people are working full-time, they’re more likely to hire others for routine home maintenance in order to keep evenings and weekends free. But that kind of help doesn’t come cheap. “If you’re looking to spend less in retirement, you can accomplish that goal by cleaning your own floors, mowing your own lawn, and repainting and sealing your own deck every summer. The great thing about being retired is having more free time on your hands, so as long as you’re physically able to tend to these tasks, there’s no need to spend money hiring someone else.” (A side note: doing your own chores is also good for your health.)
- Take Advantage of Senior Discounts: “Make no mistake about it,” says Motley Fool – “there are plenty of perks you’re entitled to once you reach a certain age.” These include discounted admission to museums and theaters, early bird seating at restaurants, and discounts on travel. We found this list of 2019 discounts on the Senior List website, and you’ll also find more through the AARP benefits website. The important thing is to make saving money a serious goal – and don’t let your pride get in the way!
Spending Less or Spending Wisely? Planning is the Key
As the Motley Fool article says, “Retirement can be a financially trying period of life, even if you’ve saved well for it during your career. To avoid stress later in life, take steps to lower the cost of your retirement. If you plan wisely, you can spend less as a senior without sacrificing the lifestyle you’ve been dreaming of.” Of course, here at AgingOptions we would add that there’s far more to planning for retirement than money! People heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage – will that be sufficient to meet your health care needs? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And as we said above, does your family understand and support your plans for the future as you age?
The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. We invite you to join the thousands who have discovered the power of LifePlanning by attending a free LifePlanning Seminar at a location near you. Invest just a few hours and you’ll come away with your eyes opened to a brand-new way to think about retirement. You’ll find a calendar of upcoming seminars here on our Live Events page – then you can register online or give us a call. Make certain your retirement planning is truly comprehensive and complete: come discover the power of an AgingOptions LifePlan. Age on!
(originally reported at www.fool.com)