7 Powerful Ways to Reduce Your Retirement Expenses

 In Retirement

retirement expenses

With retirement fast approaching, it’s time to take stock of your future. By that, I mean you need to consider cutting the costs of retirement.

Retirement expenses can be significant, and they can quickly eat through your nest egg, leaving you in an untenable financial situation during what is supposed to be the best time of your life.

Thankfully, there are several ways that you can reduce your retirement expenses.

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Cut Your Retirement Expenses with Smart Investments

Your retirement comfort hinges on making the right investments ahead of time, but you’ll find that managing your investments can be pretty costly, particularly if you’re using a professional management firm. It might be better to take a more hands-on approach.

Robo-advisors cost a fraction of a human financial advisor and allow you to control your investment decisions yourself.

According to Wendy Connick, writing for The Motley Fool, “If you have a standard, non-retirement brokerage account, you may have fees from the brokerage firm as well as from the investments themselves.” Cutting those costs now can save you a lot of money over time.

I would also highly recommend bond laddering as one of the best investment options for your retirement planning. Creating a bond ladder ensures that you have a stream of income that will arrive at known intervals, which allows you to plan for your financial future with security and peace of mind.

Think about Your Home Now, Not Later

The single largest expense most retirees face in their golden years is their home. Many find that they want to downsize once their kids grow up and move out, but they don’t make that move until after they’ve retired.

That’s a mistake and one that can cost you a lot in retirement expenses. Likewise, if you intend to stay in your home after you retire, take the time now to get it ready for your future needs.

If you think you’re going to downsize eventually, make that move before you retire (as long as your family situation will allow it, of course).

Writing for Money magazine, Donna Rosato explains that, “By age 85, two-thirds of people have some type of disability. If you can’t get around your house or community or you don’t have easy access to the medical and social services you need, you could land in a costly nursing home prematurely.”

Put your bedroom on the first floor, invest in wider doorways, and make sure entrances are covered so you don’t slip when going in and out of the house.

Consider Having Just One Vehicle

Once you retire, you and your spouse will be spending a great deal more time together. It might be a great time to cut your retirement expenses by selling one of your vehicles.

Most families today have at least two cars, but if you’re going everywhere together, do you really need two? Selling one now can help you cut your monthly costs by hundreds of dollars in some cases.

It will also help you save on insurance costs, as well, and you won’t need to pay for oil changes, new tires or repairs, either.

happy retirement

Apply for Medicare Once You’re Over 65

Sure, you have your own health insurance. That’s important.

However, by applying for Medicare after you retire and pass the age of 65, you could dramatically reduce the costs of one of your highest expenses – your healthcare.

Plus, you’ll be able to pay more medical bills in full between your insurance provider and Medicare.

Pay Less in Taxes

While your 401(k) account might not be taxed until you withdraw the money, there are other forms of income that are taxed every single year.

Taxable accounts should be spent first in order to minimize the amount of money you owe the government every year. By minimizing your taxes, you further limit your retirement expenses while ensuring that your non-taxable accounts have more time for growth that will tide you over in the future.

Leave non-taxable accounts alone as long as possible, while still taking the mandatory disbursements.

Make the Most of Your Social Security Payments

It can be tempting to start drawing Social Security as soon as you’re eligible, which is age 62. However, there’s a lot of good to be seen by waiting until you reach full retirement age (currently 66).

If you choose to take those payments early, you could lose up to 30% of your money.

By waiting until you reach the full retirement age (as defined by the Social Security Administration), you ensure that you’re getting 100% of your money each month, rather than sacrificing it to the government in the name of earlier payments.

Get Moving

My final tip is this – if you live in an expensive city, move. Get out. While some states offer a great environment for retirees, others do not.

Look for an area where there is no sales tax, or that does not charge seniors property tax.

Other perks include not taxing government pensions, or not charging seniors income tax. Some of the best states in the country for seniors include Delaware, Georgia, New Hampshire and Pennsylvania.

Of course, you’ll need to balance the potential financial savings with your comfort and ability to get around. For instance, relocating to somewhere with prolonged cold weather might not be a good idea if you suffer from severe arthritis.

Follow these seven tips and you should be able to reduce your retirement expenses significantly.Some of these can be acted on right now, before you reach retirement age. Others will require careful scrutiny of your needs after you retire.

early retirement

Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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