Enjoying your golden years without breaking the bank
September 23, 2024
Many retirees find their expenses increase in retirement, even though they now live on a fixed income. This retirement lifestyle inflation can quickly drain retirement savings if you’re not careful. The good news is there are strategies to help avoid bleeding your nest egg dry.
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- First, track your spending diligently both before and during retirement. Many unexpected costs crop up – more dining out, gifts, travel, hobbies. But if you have a solid budget and know exactly where your money goes, you can catch lifestyle inflation early. Budget for discretionary spending and stick to defined limits.
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- Downsize your home if it now seems too big. With kids out of the house, consider downsizing to reduce housing expenses like property taxes, utilities and upkeep. This frees up cash that can be better spent elsewhere in retirement.
- Keep housing costs below 30 percent of your retirement income. If mortgage or rent eats up too much, consider relocating to a cheaper area. Relocation in retirement is common anyway as people move closer to family or better weather. Take advantage to reduce housing costs.
- Pay off debts, especially high interest ones, before retiring. Entering retirement debt-free gives you a clean slate without required debt payments eating into your income. Pay off credit cards, cars, and the mortgage if possible.
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- Delay starting Social Security as long as reasonably possible. Every year you wait to collect increases your benefit amount and prevents leaving money on the table. Let your savings cover costs early in retirement while Social Security benefits grow.
- Shift to a lower-cost but adequate health insurance plan. As you transition from employer group plans to Medicare, shop around for the most cost-effective supplemental plans to keep medical costs in check. Maintain an emergency medical fund.
- Learn to DIY things you used to pay for. Now that you have free time, take on DIY projects to fix up your home, make repairs, install upgrades. This stretches your dollars further in retirement.
- Finally, carefully plan big discretionary purchases. Budget and save up for major travel, gifting or hobby goals rather than funding impulsively with retirement savings. Create sinking funds for large future expected costs.
Retirement can be more expensive than expected. But with diligent tracking, sticking to a budget, downsizing, and saying no to impulsive purchases, you can combat lifestyle inflation and make your retirement savings last. Retiring debt-free and delaying Social Security also helps you avoid draining your nest egg too quickly. Focus on enjoying your golden years without breaking the bank.
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