Cutting costs during your runup to retirement or during retirement isn’t an exercise reserved solely for people who haven’t adequately saved. Even if you have a large nest egg, it’s not a bad idea to examine your living expenses and identify ways to reduce costs.
Retirement can include unexpected costs, like if you or your spouse suffers a serious illness or requires expensive assisted living or memory care earlier than expected. There are many things you can do to plan for different scenarios, but one of the easy and universally accepted methods of preparing for the unknowns is to budget and cut costs.
The Natural Reduction in Expenses
Think of all your expenses that are either directly or indirectly derived from your job. If you have a long commute, you will automatically save on fuel costs each year once you retire. If you spend hundreds or even thousands of dollars on dress shirts, suits, tailoring and dry cleaning each year, you can likely put those expenses behind you for good. Maybe you and your spouse can get by with one vehicle instead of two now that neither of you are commuting to work every day.
There are other ancillary expense deductions attached to some of those things. You could potentially reduce your auto insurance coverage since you’ll have fewer vehicles and be driving less. You may have other insurance policies, like life insurance, annuities or health insurance policies, that you can potentially modify.
Do you and colleagues go out to lunch or pay for lunch in a cafeteria every day? Do you get drinks once or twice a week after work? Are you stopping to get coffee every morning on your way into the office? Many retirees have work-life costs they take for granted. Adding up all those savings might net hundreds of dollars a month.
Even things like vacations are made more expensive by regular business schedules. Booking flights to see family during the holidays means you’re always paying near peak prices, even when you schedule early. Once you retire, you can plan your trips around seasonal lulls or worry more about when the weather is perfect instead of when you can get time off work.
Insurance Can Get Cheaper in Retirement
Some people might assume their insurance costs will inevitably increase in retirement. You’re at greater risk for serious ailments and death, so shouldn’t things like health insurance and life insurance be more expensive? It depends.
Some homeowners insurance companies offer retiree discounts on coverage. Insurance companies assume retirees spend more time at home, which reduces the risk of certain types of claims. If the homeowners are at work when a plumbing leak or fire breaks out, damage costs can get extraordinarily high. There’s an assumption that retirees are more likely to be on hand and capable of interceding during a disaster, reducing claim costs. Plus, losses from burglaries or vandalism are less likely to occur when someone is in a home.
Most auto insurance companies also offer low-mileage discounts for people who don’t plan on driving much. These discounts can be missed if you don’t specifically inquire about low-mileage or senior discounts, so make sure to check with your insurer.
Your insurer might also offer specific discounts for seniors who take defensive driving courses designed for older drivers. Auto insurers frequently extend discounts to people who adopt various apps and telematics technologies to track driving performance and award you for driving safely with reduced rates.
Paying Off Your Mortgage
Many retirees have already paid off their mortgage by the time they retire, which can be a huge benefit in terms of expenses. If you’re nearing retirement in the next few years and you still have mortgage payments, you may want to look at adjusting your budget to pay off your mortgage as soon as possible. Not having a housing expense each month could add significant breathing room to your budget.
Alternatively, consider downsizing your home. You may be able to sell your existing home and buy a smaller, more manageable property outright for cash.
DIY Lifestyle
One of the big selling points advertised by independent living retirement communities is they handle everything for you, from landscaping to maintenance and housecleaning. If you and your spouse are just reaching your retirement years, you might not be ready to have nearly every task of daily living taken off your plate.
You might currently have a landscaper come weekly or bi-monthly to trim the grass, trees and plants. Maybe someone comes to clean your pool every week, or you pay a dogwalker to get your pets some exercise. Handling things like landscaping and housekeeping yourself is a way to cut costs and stay busy during retirement.
Your Lifestyle Doesn’t Have to Change in Retirement
The Arizona retirement experts at Fullerton Financial Planning are dedicated to helping our clients prepare for retirement. It’s never too early to start planning for the future or your legacy. Call us today at (623) 974-0300 to schedule your consultation.
