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8 Ways to Cut Costs in Retirement

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.

Tackle utilities

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.

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Anonymous   |     |   Comment #1
Sheryl:  Would that we all could live in the fantasy land that you have projected above.  "Quit bailing out kids".  Sorry if I can't turn off motherhood just because they grow up.  If they lose their job and have medical problems, you had better believe they can still count on "me and DP" to bail them out.  I don't know what others save for but to me saving to help our kids (especially in this no job etc. economy) should always come first.   As for all the other examples, if people have to be told to do them, they probably don't have any savings.  Usually I like your articles but this one seems like it came from Retirement 101 or that $3.00 course I took tons of years ago to learn how to save.  Savings means using common sense.  You want to save, you learn to spend less.  That's it in a nutshell, imo.
Anonymous   |     |   Comment #2
Well, where do I begin. Your doomsday scenario is depressing and mostly inaccurate.
Some of  your readers may agree with your point of view, but certainly I disagree.

I have saved and sacrificed all my live to have better life in retirement, full of happy moments and easy going days without warring for payments and money.
If that dream is not achieved, then what is the purpose of being retired.
If I have to continue to go down-sizing on everything, then I have missed the point of life and all those years I spent in misery are now, according to you, a new normal.

Why spend the old age in constant wary and down-sizing and what is the point if all of those changes if it made me miserable and unhappy and induced a feeling of failure.
Is this a new social experiment to ponder to modesty and un-achievable dreams as our political system has changed or this is a brainwashing to the masses to not follow a life dreams and not to expect better days in future.

I descend from your point of view and will follow my right to happy life and my way of living.
jshannon   |     |   Comment #3
Nice article. Boy did the last two posters misinterpret and overreact to this article. I do most of the above and I'm not even 50 years young. If you cannot do these things you must be very spoiled. Live your own life, though, is my motto.
Anonymous   |     |   Comment #4
Maybe I missed it in one of your articles, Sheryl, but I don't think I have seen something that was the most important part of that cheapo course on finances I took years ago. It said "Don't buy anything you can't pay cash for and that included cars, vacations, clothes etc."  The secret was to save ahead of time for something you, DP or someone in your family wanted and they had to wait until you had enough to pay cash for it.  The only thing we didn't do this for was the mortgage on our former home.  The main purpose is to train ourselves to find ways for "others" to pay us interest and we are never to have to pay them fees or interest on debts.  It works great and once you form the habit it just becomes your routine. The trick is to get your DP and family members to cooperate with it.
Anonymous   |     |   Comment #5
Sheryl, you are too frugal for my taste. What is life all about if you can not enjoy it.
Cutting down on everything is outright brutal and cheapens the life style.
I agree with #2, set your own way to live and don’t be sorry for that enjoyable cup of joe.
You don’t live forever to be that Draconian in everything you do or want to do.
Life without life insurance as you are suggesting to save $350-$3,000 is criminal not to have one, will cost my family over 1/4 million of dollars. Penny wise and pound foolish is not a life style for me. We can all live poor and die rich, but what is the point to that kind of life.
Anonymous   |     |   Comment #10
Sherly:  Get real.  I agree with #9.  Give us some ideas for income on our retirement savings that has been stolen from us.
51hh   |     |   Comment #11
The basic principle here (be frugal and be prudent) is ok; most apply to adults of all ages.  The details are all trade-offs and vary on a case-by-case basis.  For example, eat-out need be costly, but it can be a meaningful activitity for family (life is too short, certain reasonable enjoyment is essential).  Getting rid of landline can risk reliability at critical times.  It is not a worthwhile savings for me.  In addition, cell phone has its own health risk.  I will not downsize my home since I made great effort building it and I deserve to enjoy it; others may very well opt this choice.  Life insurance... it is not an either-or selection; but how much insurance IMHO.  Kids/grandkids; it is again very YMMV.   

In sum, just live/build a "habitual" frugal and prudent life into retirement.  It is difficult to change one's life style from spending to saving all of a sudden at the juncture of retirement.    
Anonymous   |     |   Comment #12
Sheryl:  With your list above I think you left out one of the most important.  "Don't pay retail for anything" unless it is an emergency and you can't wait until it goes on sale.  I think many people who read the article think it makes for a miserable life.  It can actually make for a much better life.  However, I think it should have included that in order to follow what you posted, one "must" be sure that their DP is in agreement with taking these steps.  Before I ever said "I Do", I made sure mine said "I Will".  It takes two to tango "and" to live a disciplined life financially, imo. 
Anonymous   |     |   Comment #13
Being overly frugal can ruin your life for good.

You become penny pincher and if you ever pay retail price can make you sick.

Be careful what you wish to accomplish, otherwise your life will become enslavement on material things.

I can downsize to a cave and save all of my money, but what will I accomplish doing that, nothing good,you will become antisocial and without aim in life.

Accumulating money is not the road to happiness. On the other hand, if you have money left over from the day to day living, save it, by all means.

Putting unrealistic goals and downsizing is not my thing to do in future.
Shorebreak   |     |   Comment #15
Just remember. All the money in the world won't help you if you are stricken by ailments and disease in your advanced years. Be happy if you are healthy not wealthy. Keep yourself in good shape rather than thinking about accumulating more wealth all the time.
Anonymous   |     |   Comment #16
#15  Health is always the greatest gift no matter what our age.  However, if one has a child or children who are born with a chronic disease, you had better pray for some "wealth" to pay the expensive health insurance and medical bills even when they are adults and may not be able to help themselves.  I think everyone needs to save for a future which may bring them unexpected problems.  It's either that or just tell yourself, you will let the government take care of you.  When we see others with terrible medical problems, we tend to think it will never be us.  Take my word for it.  It hits you like a bolt of lightning and whether you or your child survives can have a lot to do with whether you cared enough to prepare for "whatever" years earlier.  This is not about trying to become wealthy.  It is about trying to survive.  "Health" is a precious gift not given to everyone unfortunately.
Gayle   |     |   Comment #17
I agree with the posters who advise not to be so frugal.  Here's a favorite quote of mine, from NYC Mayor Michael Bloomberg of all people.  I thik that it applies to spending as well as giving in oue's later years:

 "I am a big believer in giving it all away and have always said that the best financial planning ends with bouncing the check to the undertaker."[
Bozo   |     |   Comment #18
Interesting thread on SWR's and retirement expenses over at Bogleheads. Bottom line: no matter how much you slice it or dice it, a conservative lifestyle and a conservative SWR can still be torpedoed by a late-in-life medical situation. You can go nuts trying to predict the unpredictable.
Anonymous   |     |   Comment #24
Being frugal all you life certainly does pay off.  Even with a bad economy my wife and I are enjoying our retirement years.  Always lived below our means.  Never tried to "keep up with the Joneses", still living in same modular house we bought 40 years ago.  Did without things we wanted but did not need until we had the cash to pay for them and never paid a dime of credit card interest.  Today we are comfortable with a modest means to see us through until we are called from this earth with a good long term health care insurance policy as a back up.  By the way, I was just an average blue collar worker, not a highly paid manager or professional.  Thanks to my parents, they taught me from the start, no matter how much or how little you make, always set a portion aside to be saved.
51hh   |     |   Comment #30

The keys are balance, civil, and objective.

Balance: Do everything in moderation, even frugality.  Be happy and enjoy life.

Civil: Get along and appreciate everybody here.  No criticisms, imposing, or attacks.

Objective: Consider all comments as inputs and make one's own decision about "one's" life. 

I think that you all have good points; and I benefit from them all:-)

Greg   |     |   Comment #32
Sheesh.  Give Sheryl a break.  She was only setting out fairly standard, sensible advice.  Not everyone will want to adopt all of these suggestions, but none are out of line or excessively penny-pinching.  Everyone's situation will differ.  Some who are stressed will benefit greatly from moving to a smaller house.  But others will be reluctant to leave a beloved homestead and may have the wherewithal to keep it.

I think the larger philosophical message is to look at the meaning of money.  What is its real utility to you?  If that $4 latte gives you great pleasure, by all means keep buying it.  But if you buy a new car every three years just because your Dad did or you're trying to keep up with the Joneses, maybe you should re-examine your assumptions.
uncle p
uncle p   |     |   Comment #33
The comments are valid on both sides but the real understanding about weather to be tight or lose with the funds is knowing each persons financial situation.  Imagine 2 different people in retirement, man A has a shopping bag full of money but can never have more, man B has a sandwich bag full of money but every month he gets another sandwich bag full of money.  How can they both spend the same?  If you get a generous pension you can spend more than the person living on savings and drawing down savings to live isn't so easy for the group who were frugal.
Anonymous   |     |   Comment #35
Great article. If you follow the Dave Ramsey principles, it works pretty darn good. Obviously, if kids are in dire straights - you do what you must, but otherwise your best gift is to not be a burden on them. If you can afford to eat out and drink latte's, great, if not - be realistic.
DaveG123   |     |   Comment #37
I am not too suprised that there are a lot of emotionally driven responses here, having sufficient assets at retirement is a real concern.  I like a couple of the ideas from others and would add them to the author's list:  pay cash for whatever you can, switch your life insurance to long term health care, e.g., assisted living, take vacations but save for them, reduce your number of credit cards, if you end up as a care taker for your grandchildren be sure and take them as dependents on your taxes - the same for your own parents, buy mutual index funds or bonds if you must it is too difficult to pick individual stocks in this climate and they have low fees, find a hobby that makes you healthier whether its yoga, hiking, biking, or something that gets you out and about. Otherwise your retirement will be TV and shopping and waiting for health problems.