Senior couple working on laptop

How to Cut Costs for Retirement

How do you know if you’re saving enough for retirement? It’s a question we ask ourselves often. We all want our golden years to be stress-free, but the financial planning part can be confusing. If you’ve ever wondered how to ensure your retirement nest egg not only lasts but thrives, you’re in the right place. This isn’t about pinching pennies; it’s about finding ways to make your money go further.

Financial planners estimate that you will be spending 70% to 80% less during your retirement years than while you were working, so now you must consider if your savings, investments and Social Security will add up to the lifestyle you desire.

What is a realistic budget for retirement? There’s no one-size-fits-all strategy that will work for everyone, but we can all use a good financial tune-up from time to time. In this blog, you’ll learn practical strategies, smart budgeting tips and lifestyle adjustments that empower you to trim unnecessary expenses while safeguarding your retirement goals, even on a fixed income.

Statement of Fairness: Considering senior living options for yourself or a loved one? We’re here to help at every step. And even though we specialize in Independent and Assisted Living communities, our goal is for YOU to find your best path to gracious retirement living, and part of how we achieve that is by providing reliable information on all types of senior living, not just the ones we offer. When our offerings serve as useful illustrations to a specific topic, you can find that information in the attached sidebar.

Disclaimer: This content is not intended as financial advice. Remember to review your plans and budgets with a licensed financial professional when making significant financial decisions.

Cost-Cutting Strategies: Living at Home or Moving to a Retirement Community?

Aging in place

The desire to remain at home as we age, also known as aging in place, holds great appeal. But certain costs come with it. If you are seeking to remain in your home, you’ll have to budget for groceries, transportation, home safety and accessibility modifications, social activities, and home health care. While aging in place can be a viable option, it’s crucial to approach it with realistic expectations and careful planning.

Another idea to consider is downsizing in the retirement years. Housing costs represent the biggest personal budget expenditure. A smaller home comes with lower utility and maintenance costs. Using assets to pay off a mortgage eliminates a hefty monthly bill.

Senior living

A move to a retirement community can be rich in financial, physical and emotional benefits. Some independent living communities offer an all-inclusive monthly fee that covers rent, meals, amenities, transportation and recreation.

Not only will you know what you’ll be spending monthly, but you’ll be enjoying an active lifestyle in an enriched environment created especially for older adults. The proceeds from selling a house is one way to pay for a senior living community.

What Does Long-Term Care Insurance Cover?

Long-term care is for individuals who need help with the activities of daily living such as eating, dressing and bathing. These services can be provided through in-home support agencies or given in a residential community. A long-term care insurance policy pays for the services that Medicare doesn’t cover.

The younger you are when you purchase long-term care insurance, the lower your premiums will be. However, getting a policy at an older age – for example, 60 to 65 – may offer better affordability with higher premiums but less total dollars paid. In other words, while premiums may be higher if you purchase a long-term care policy at an older age, you may still save money in the long run because you will pay premiums for a shorter period of time.

Senior woman reading paperwork

How can I cut the costs of long-term care?

  • Enroll in Medicare as soon as you qualify. Your initial enrollment period begins when you turn 65. You can start the process as early as three months before your birthday, and the period ends three months after the month you turn 65. Medicare will pay for care in a skilled nursing facility for 100 days.
  • Read more about Medicare benefits by downloading Medicare and Home Health Care.
  • Explore Supplemental and Advantage insurance plans. You will pay monthly premiums based on the policy you choose, but they help pay for medical costs that Medicare does not. Some plans offer extra coverage for hearing, dental, vision and even gym memberships.
  • Medicare drug coverage (Part D) can help with the cost of prescription drugs. Review your plan to see if your specific prescriptions are covered. Ask your pharmacist about coupons and other savings programs you can use.
  • If you’re under 65, contribute to a health savings account (HSA). This is available to you through banks, credit unions and other financial institutions even if you’re not working. Your pre-tax contributions can be withdrawn tax-free and used for qualified medical expenses that include long-term care, doctor visits, prescriptions, ambulance costs, psychiatric care and more.

What Is the Best Fixed-Income Strategy?

The simple answer is planning and budgeting.

People spend the most money on housing, transportation and food. No surprise there, but in order to understand where your dollars are going, write down every purchase and payment you make, no matter how small. Whether it’s a cup of coffee or a major home improvement project, keep track.

Divide your expenses into Needs, Wants and Savings/Debt Payment.

What is your income? Add up:

  • Social Security
  • Supplemental Security Income (SSI)
  • Pensions
  • Withdrawals from 401(k) or 403(b) plans
  • Part-time salaries
  • Income from rental properties and other sources

With your income total, allocate 50% to Needs, 30% to Wants and 20% to Savings/Debt Payment. How do your spending and income numbers match up? This exercise can be a real eye-opener and point to areas where cost-cutting is needed.

If you’re still employed, start saving early and contribute to individual retirement accounts that work to your tax advantage.

How Can I Cut Back on Spending When I’m on a Fixed Income?

If you’ve created your budget, you know where you’re spending your money. Now you can make thoughtful changes, not painful ones.

  • If you’re living with a spouse or partner, do you really need two cars anymore? Now that you’re in your post-career years, you can easily cut the cost of gas, maintenance and insurance in half.
  • You can lower your home and auto insurance by paying a higher insurance deductible. If that’s a risk you’re willing to take, you’ll pay less each month. Shop around for a less expensive policy. The insurance business is highly competitive, and the differences in rates may surprise you.
  • Now that you have a fixed income, make your best effort to pay down any debt. Refinance your mortgage if there’s a lower rate available, downsize or move to a senior community within your means.
  • Are there life insurance policies you no longer need? Cashing those in may give you the extra funds to pay off other debts.
  • You may be paying for fees that are taking money out of your investments. Review your financial statements, and if the fees aren’t stated plainly, give the bank or institution a call.
  • Internet, cable and streaming costs keep creeping up. If you’re not enjoying or watching some of those channels, cancel them. Call your provider and ask if you’re eligible for the Affordable Connectivity Program. The ACP is a federally funded program that could decrease your bill by $30 or more.
  • Vacations are not out of the question. Significant savings can be had if travel time is scheduled during the off-season. As a bonus, there will be fewer tourists competing to see the same attractions.

How can I help my loved one adjust to living on a fixed income?

After all their years of nurturing support, you want to be there for your loved one during these important years. Here are five ways to help without becoming responsible for their bills.

Fixed income adjustment tips gardening infographic

Unlock Your Financial Security

No grand secret exists to maximizing your retirement savings. Safeguard your hard-earned dollars by using common-sense budgeting strategies and trimming unnecessary expenses. Arm yourself with knowledge and take advantage of the benefits and financial programs designed for older adults living on a fixed income.