8 Ways to Cut Costs in Retirement
When you say goodbye to the 9-5, you'll also say goodbye to quite a few things. For most people there's precious little wiggle room in their budget once there's no paycheck, no overtime or bonuses. Truth is, you'll have to learn to make peace with the word no. Sacrifices will have to be made.
Here's where to make changes.
Downsize your home
Think smaller home or condo. “Downsizing gets you the most bang for your buck because it has a domino effect on other budget items – a lower mortgage, property taxes, utility bills, homeowners' insurance, and maintenance,” says Tom Corley, author of Rich Habits: The Daily Success Habits of Wealthy Individuals. The cost savings can be significant.
Forget new cars
Don't buy expensive new cars. “”Get out of the habit of buying a new car every 3-5 years,” says financial coach Kelley Long. Truth is, some retirees don't do a lot of driving. “Keep the old car going longer with repairs. When you consider the cost of a new car is $25,000 on average, and the depreciation of a new car – even if it has low mileage, driving an existing vehicle longer is a huge cost savings,” says Curtis Chambers, founder of Chambers Financial Group.
Get rid of life insurance
That might sound like heresy, but if retirees don't have a significant other and their children don't need financial help, canceling their insurance policy will save them money. By eliminating life insurance, retirees can save from $350-$3,000 per year, depending on the policy they have, points out Howard Dvorkin, founder of ConsolidatedCredit.org.
Be a bit more conservative
Maybe you had a penchant for risky investments. Make the adjustment. “Retirement is not the time to indulge a stock-picking hobby or play games with the market. Stick to a more steady trajectory based around your unique investment goals,” says Dan White, a financial advisor with Dan White & Associates.
Rein in kids and grandkids
You've been lavishing them for all their lives, those days are over. “Bailing out adult children may endanger your long-term savings plan and leave them with the burden of your expenses down the road. Try to help them reduce expenses rather than covering them yourself,” says White.
As for the grandkids, set a budget. “There are a lot of grandparents that use retirement savings to fund their grandkids' college expenses. Unless you have an unlimited supply of money, you are assuming a big risk when you use your assets to pay for a grandchild's education,” says Steve Repak, author of Dollars & Uncommon Sense: Basic Training for Your Money.
Give the gifts of yourself and your time. Give a home-cooked meal, or a cake or a pie. Give babysitting and house watching, says Kay Boyd, EdD, CFPR, senior vice president at Sovereign Investment Group.
Utility companies will do free energy audits to show you ways to make your home more energy efficient. Also consider taking a more affordable package from your cable or satellite company. Do you really need all those channels? Consider too, getting rid of your land line phone and relying on your cell, suggests Frank Nargentino, a registered representative at JHS Capital Advisors.
Do sweat brokerage fees
Maybe in the past you were not focused on how much you were shelling out for your brokerage. High brokerage fees are out. “This is an easy thing to give up. Many seniors don't realize the significant costs they may be paying to manage brokerage accounts. Seniors should make sure that there is full disclosure of all fees. Then they can decide whether they would prefer a more efficient alternative,” says White.
Eat out sparingly
Sure you have the free time to eat out, but nothing busts a budget and packs on the pounds when you should be much more mindful of your health, than eating out all the time. Even daily java dalliances add up. “Your $4 a day latte habit can end up costing you $30 a week or $125 a month. If your better half is tagging along with your, your morning ritual could realistically be costing you over $250 a month,” says Repak.