As if retirement wasn’t hard enough, inflation and economic uncertainties are adding to the pressures.
Money is a big part of the stress. Financial planners generally recommend that people plan on spending 70% to 80% of their preretirement income during retirement.
But many people worry that they won’t be able to save enough. And considering how bad we are at saving, many of us will find it difficult to meet our retirement savings goals, even with monthly Social Security checks.
It’s difficult for retirees to cut costs. Here are some tips from financial planners:
— Create a budget.
— Don’t just plan to downsize, really do it.
— Retire in a state with lower taxes.
— Shop for lower-cost services.
— Become a one-car household.
— Evaluate insurance, including life, health and home.
[READ: Costs to Include in Your Retirement Budget.]
1. Create a Budget
Many people have a basic idea or “skeleton budget,” but Mitch Katz, founder and partner at Capital Associates in Bethesda, Maryland, asks clients to list everything they spend money on each month, from their Netflix subscriptions to their car insurance premiums, groceries and gas.
“We write down every penny that they spend,” he says. “Because that’s when we say OK, now that we’ve done this exercise, what can we renegotiate or cut out.”
2. Don’t Just Plan to Downsize, Really Do It
People often say they are going to downsize, but financial planner Derek Pszenny of Carolina Wealth Management in Greenville, North Carolina, says they sometimes end up with even larger homes.
“I see it all the time,” he says. “Somebody retires and moves to a retirement community, and their plan was to downsize to a smaller house. But they ended up moving and getting a bigger house,” he says.
“They justify it by saying, ‘I want to have space so when the grandchildren visit’ … Unfortunately, the grandchildren don’t visit very often. And when they do, they stay in a hotel down the street. You got this big, giant house with all this extra space for no reason,'” he adds.
3. Retire in a State With Low or No State Income Taxes.
Besides the great weather, there is another major reason people retire to states like Florida: no state income taxes. Katz says retirees relocating should consider states with no or lower income and property taxes.
“The state you live in makes a difference,” he says. The states with no state income taxes are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
[See: The Most Tax-Friendly States to Retire]
4. Become a One-Car Household
Many people have had a two-car household their entire lives. But the paradigm has shifted, Katz says, adding, “It’s not just the savings on the one car. They save on gas, they save in maintenance, they save in car insurance.”
He suggests that a couple use a ride-share when they need that second vehicle.
5. Shop for Lower-Cost Services
Many people stick with the same service provider for years because it’s too much of a hassle to quit. Looking for a better value could save you hundreds or thousands of dollars annually.
Look for less expensive options for cable, telephone and internet services, or cut the cord altogether. Consider whether your Medicare prescription drug plan or Medicare supplement plan is the best priced for your situation. Think about refinancing your mortgage and shopping around for lower bank account or investment company fees.
[How Retirees Can Cope with Inflation]
6. Evaluate Your Insurance Policies
Insurance needs can change in retirement, Katz says, but may people keep the insurance for years without looking for cheaper alternatives.
“You might have life insurance that you don’t need anymore,” he says. “Now that you’re retired, you may not need that insurance if you’re looking to save.” Also, evaluate your property insurance or umbrella insurance.
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How to Cut Costs in Retirement originally appeared on usnews.com
Update 06/26/23: This story was published at an earlier date and has been updated with new information.
