It is usually easy to live on far less money in retirement, than it was when you were working. You do not have the expenses of working, like commuting, lunches, child care and work wardrobe. If your children are grown and living on their own, you are no longer paying to house, feed, entertain, clothe and educate them.
Your mortgage is likely paid down significantly, if not paid off entirely. Since fewer people probably live in your house now and your commute to work is not an issue, you can sell your home and buy a smaller house in a less expensive neighborhood. Therefore, do not fall for the myth you must have a million dollars or more in the bank to retire. It is still important, however, to follow a budget. Here are 3 tips for living on a budget in retirement.
- Maximize the Amount of Your Social Security Check
If you retire at age 62, the Social Security Administration (SSA) will penalize your check every month for the rest of your life. If your full retirement age is 67, retiring at age 62 will cost you about 30 percent of your check every month. Therefore, if your full age retirement check would be $2,000 a month, you will only get about $1,400 a month if you retire at 62.
The SSA will give you a bonus every month for the rest of your life, if you delay collecting retirement benefits past your full retirement age. If your full retirement age is 67 and you wait until age 70 to collect benefits, you will get a bonus of about 32 percent. Therefore, that $2,000 check becomes $2,640 instead. , the person who retires at age 70 gets $1,240 a month more than the person who retired early. That’s a difference of $14,880 every year.
- Simplify Your Life
This tip can increase your happiness, while it trims the fat off of your budget. Go through your closets and pull out everything that you do not use. Take them to a resale shop or sell them online. You’ll get cash, and things will not fall out when you open your closet doors.
Get rid of other things you do not use anymore. You might still have subscriptions you signed up for, when the kids were at home, and no one uses them now. Top-tier cable television packages, streaming services and accounts for video games are typical examples.
Think about downsizing to a smaller house to reduce your mortgage, property taxes and utilities. Having less yard work and house cleaning are bonuses. Do not assume that selling your home and renting an apartment is always a good way to save money. Rent will go up year after year, and people are living longer than ever. In time, your rent could consume much of your monthly funds.
- Be Savvy, Not Cheap
For some people, how to save money on eating out, is to leave a skimpy tip. Instead of forcing an underpaid waitstaff to fund your retirement expenses, eat out at lunchtime rather than in the evening. Many restaurants have the same food on their lunch menu as on the dinner menu, but without the jacked-up prices. You can then afford to tip your server appropriately and avoid the evening traffic.
Use your senior discounts, homestead property tax exemption and other perks that come with having collected enough birthdays. Grocery stores offer double coupons and additional discounts to seniors on particular days of the week. Seniors can get a reduced rate on utilities, transportation, travel, shopping and many other things they might need or want.
Meet with an elder law attorney in your area, because this article is about the general law and your state might have different rules.
The Motley Fool. “Here’s What the Average Retired American’s Budget Looks Like.” (accessed October 10, 2018) https://www.fool.com/retirement/general/2016/01/25/heres-what-the-average-retired-americans-budget-lo.aspx
USA Today. “Retirement: 10 Ways to live frugally.” (accessed October 10, 2018) https://www.usatoday.com/story/money/2015/02/10/retirement-steps-for-living-frugally/22416721/
Bankrate. “Best age for Social Security retirement benefits.” (accessed October 10, 2018) https://www.bankrate.com/retirement/when-to-take-social-security/