A 2018 survey by the National Institute on Retirement Security showed a whopping 68% of 55- to 64-year-olds have less than 10% of what they need in retirement savings. Yikes! If you’re in that boat (or if you’re well prepared but still like to save money), here are some ways to cut costs and still live well in retirement.
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Downsize your home
It’s hard to say goodbye to your family home, but you probably don’t need four bedrooms and 4,000 square feet in retirement. Sell your home and buy something smaller; put the extra money in your retirement account. Consider moving to an area with a lower cost of living to stretch your money even more
Worried about what to do if you downsize and your family comes to visit? Make it a mini-vacation and rent an Airbnb, cabin, or beach house for your whole family for the week. You’ll save thousands by not paying for more house than you need the other 51 weeks of the year.
Plan for income taxes
Unless your money is in a Roth IRA or Roth 401(k), you’ll pay income taxes on your withdrawals in retirement. Pay attention to the timing of your retirement account distributions to avoid a huge tax bill. Review your other sources of income and your tax deductions. Try not to bump yourself into the next highest tax bracket by taking large withdrawals.
Switch to low-cost funds
If you’re counting on your portfolio for some of your retirement income, you don’t want your earnings eaten up by high-cost funds and management fees. Switch your investments to low-cost index funds. You can keep your asset allocation the same by buying an equal mix of stock and bond funds, but cut your holding costs significantly.
Avoid penalties
The taxman takes his cut if you withdraw funds too early or take out less than you’re required to in minimum distributions from your retirement account. Make sure you know your numbers.
While it’s tempting to sign up for Social Security as soon as you’re eligible, most of the time, you lose money by getting your benefits early. Postpone taking Social Security as long as you can; you’ll get a much higher check each month in retirement.
Finally, sign up for Medicare when you’re first eligible, and get your Part D coverage right away to avoid premium penalties. If you want a Medicare Supplement Plan, buy it during your Open Enrollment Period to get the best rates. If you wait, you may not be able to buy a plan if you have pre-existing conditions, or you may pay a much higher premium than if you’d signed up right away.
Review your utilities
Most people save money with programmable or smart thermostats; one study showed that an average family saves $1,000 a year with a smart thermostat. Next, check your cell phone plan to make sure you’re not paying for more than you need. It pays to shop telecom providers—you may get a nice incentive to switch to another carrier or a new plan.
If you have a landline, re-evaluate the need for the extra expense. If you live in an area with strong cell coverage, you may not need a landline.
Cut the cable cord
Cable packages are ridiculously expensive, especially when you’re paying for hundreds of channels you never even use. Services like Hulu and SlingTV have live programming and cost a fraction of cable service. Supplement it with Netflix or Amazon Prime for movies and your favorite TV series and you’re set.
Be smart with healthcare costs
Rate shop your Medicare Advantage and Part D prescription drug plans every year to make sure you’re getting the best deal. Don’t leave any benefits on the table; review everything in your plan brochure carefully. Some plans have discounts for eyeglasses and contact lenses with certain providers, others may have a monthly allowance for over-the-counter medications and medical devices. Know how to get the most out of your plan.
Take advantage of health and wellness benefits if your plan offers them. If you have free fitness memberships, health screenings, nutrition services, or other perks, use them. The best way to save money in retirement is to stay healthy.
Review your insurance coverage
Now that you’re retired, you probably don’t need the same amount of life insurance you had when your kids were at home and your house was mortgaged. You may also be able to save money by upping the deductible on your homeowner’s and car insurance. It never hurts to rate shop all your coverage to see if you can save money by switching carriers or combining your policies.
Look for travel deals
When you’re not tied to a job, you can travel whenever you want. Off-season and shoulder-season travel is usually significantly less expensive, and you enjoy less crowded destinations. Last-minute deals are often steeply discounted; when you’re flexible, you can take advantage of the savings.
Don’t be afraid of alternative lodgings like elder hostels. It’s a great way to meet like-minded travel buddies and many hostels even organize optional tours and other group activities. Airbnbs may be more affordable than hotel rooms—and more comfortable and accommodating for the type of vacation you’re planning.
If you’re renting a car, go with the smallest practical size and don’t be afraid to ask for a free upgrade at the counter. Skip the optional insurance if you pay with a credit card. Most major credit cards include rental car insurance, and your own car insurance may also cover you when you’re driving a rental car.
Embrace DIY
Do-it-yourself doesn’t necessarily mean climbing ladders to repair your own roof or messing up the garage changing the oil in your car. It does mean finding things you’re currently paying others to do that you could easily do yourself—or enjoy learning to do, anyway.
If you’re currently spending hundreds every other month on your hair color, try doing your roots at home to extend the time between appointments. Or switch to home hair coloring entirely. Find a friend and paint each other’s nails instead of paying for monthly manicures.
Learn to winterize your AC unit instead of paying for maintenance visits. If you don’t know how to do simple home tasks such as fixing a leaky faucet or unclogging a drain, buy a book and a toolkit to save money on handyman visits.
Kick the take-out habit and learn to make your favorite foods at home. When you’re not rushed to get dinner on the table for the family, spending time creating things in the kitchen can be a fun and relaxing pastime that saves you lots of money. The average couple ages 65 to 74 spends nearly $3,000 a year eating out.
Depending on your spending habits now, these frugal living tips could save you a lot or a little in retirement. But when you’re living on a fixed income and trying to economize, every dollar you save makes a difference.
