Retirement is expensive — really expensive.
According to the “Rule of 25”, you will need roughly $300,000 in retirement savings for every $1,000 per month you spend during retirement ($1,000 * 12 months * 25 = $300,000). You can also check out these methods to help you figure out how much you need to retire or delve deeper into the question of whether you have enough to live on during retirement in this downloadable ebook.
Regardless of how we arrive at the answer to this question, the lesson is clear: we’ll all need to determine how to fund our future. What’s also true is that small cuts in retirement spending can multiply into huge reductions in the amount of money you need to retire. The less you spend, the sooner you can quit that job and start living the life of your dreams.
What Kind of Living Adjustments Can We Make To Afford Retirement?
Below are five areas where you can easily cut expenses and reduce your retirement savings needs by $300,000, $600,000, or even more.
1. Your Home
Sure, you’ve dreamed of living the life of leisure in a beach home during your retirement. But what if you could live that life without the headache of a huge mortgage?
Adjust your vision of what retirement should be, and you might find yourself dreaming of smaller homes. Consider the advantages:
- A smaller mortgage, paid off sooner
- Lower property taxes
- Reduced insurance premiums
- Fewer maintenance costs
- Less yard work, especially if you get a condo
Now take this scenario a step farther. What if you lived in an RV?
Say goodbye to your mortgage, property taxes, homeowners’ insurance and association dues, upkeep and other homeowner headaches. Say hello to selling your home, producing investment income via home equity, living on the open road and traveling when you please.
Freed of the burdens of home ownership, you can also easily store your RV and travel abroad. You might even find contentment in a national park or other outdoor location.
2. Your Vehicle
If RV living doesn’t appeal to you, get creative with your vehicle. Maybe you can get by with one car instead of two. The savings on insurance, gas and maintenance will significantly reduce how much you need to save for retirement.
Better yet, situate yourself near an urban epicenter, and you might not need a car at all. When you’re ready for a road trip, simply rent a car. The rest of the time, slip on your walking shoes and take advantage of public transportation.
3. Your Location
Quick affordability check: What’s the cost of living in your current hometown? Perhaps you could do better elsewhere in a less expensive area.
Some retirees choose to relocate out of the country or to another lower cost area. Central and South America offer some of the most affordable retirement spots in the world, according to U.S. News and World Report. With an ideal combination of warm weather, culture and low-cost real estate, places like Ecuador and Colombia are well-suited to expatriates.
Prefer to stay domestic? Check out SmartMoney.com’s New Best Places to Retire. The list includes Prescott, Ariz.; San Luis Obispo, Calif.; and Bloomington, Ind., among others. Be aware, however, that these places can always get overcrowded and more expensive as word spreads among retirees. The best course of action is to do your research on any potential location. Chart out your personal retirement plan using free online calculators and solid retirement coaching advice. Then pack your bags, and prepare to retire in style.
4. Your Health
If you spend more of your time at fast food joints than in the produce aisle or the gym, it’s time to reconsider your habits. You can reduce your health care costs in retirement by eating healthy and exercising regularly.
Walking is one easy, affordable way to stay fit. Turn it into a social activity by finding a walking buddy or a local walking club. Mix up your routine and keep your muscles toned by adding in a couple days of yoga, Pilates or resistance training.
Equally important as exercise is the way you eat. Stick to the perimeter of grocery stores, where you’ll find fresh produce and lean proteins. The simple carbohydrates and sugars in the center aisles are what really pack on the pounds and negatively impact your health. The healthier you are, the less you’ll see the doctor — and the more money you’ll have to enjoy your retirement.
5. Your Possessions
You’ve spent a lifetime collecting lots of “stuff.” Do you really need more of it?
Rather than accumulating more useless things, save your money for the lifestyle you desire as a retiree. Consider what will make you happier: that nice Pottery Barn lamp, or that trip to Italy you’ve always imagined. Understand that there’s no shame in wanting the lamp. However, if you buy it, also understand that it eats into your retirement budget. You will need to reduce costs in another area in order to maintain your retirement income.
And if you must shop for “things,” wait for them to go on sale. Sign up for email promotions from your favorite retailers. They’re bound to send you special discounts that will allow you to purchase new items from time to time.
Enjoy Yourself — It’s Later Than You Think
You haven’t come this far in life only to run out of money during your golden years. By learning to find happiness on less, you can hasten the day when you say goodbye to your job so that you can start enjoying your retirement sooner rather than later.
Saving money doesn’t have to mean sacrifice. You can lead the fulfilling life you desire while still building the retirement security you deserve. All it takes is a little creativity and determination.
About the Author
Karen E. Spaeder is a former managing editor of Entrepreneur magazine and a staff writer for FinancialMentor.Com, where you’ll find a great financial coach, and tools and resources to help you calculate your retirement needs. When she’s not writing about retirement, Karen loves watching cooking shows, exploring Southern California wineries and discovering new restaurants.
Copyright © 2011 The Digerati Life. All Rights Reserved.
{ 5 comments… read them below or add one }
Thank for a useful list of money saving ideas for retirees. I would suggest one more — adventure travel. Traditional travel — cruises, staying in resort locations, and the like — tend to be quite expensive. But adventure travel — roughing it a bit and going to out-of-the-way places — is far less expensive. My wife and I spent a year in South America — eight months working voluntarily in the Peruvian Andes. We then traveled, non-luxury, by bus mainly, throughout Ecuador, Chile and Argentina. Our year in South America was indeed adventurous while, at the same time, economical.
– Bill
@Bill,
A lot of seniors who are in shape and are healthy may find this form of living attractive. I agree that this is one awesome way to spend retirement. What a lot of people may not realize is that living in a different country where cost of living is cheaper is a great alternative. Of course, there is that wariness about living somewhere else where the culture is different, but sufficient preparation can ease the transition.
While still young, I’d do a little traveling to find out some areas and options where to settle down for retirement. It may be good to keep an open mind. The world is a huge place and possibilities abound.
14 years ago, I downsized when our children moved out. I started to prepare for retirement in a lot of different ways. I increased my mortgage payments to make sure it would be paid off by retirement. My cars do not have payments, but I will replace them soon to have them paid off. Lowering your cost of living without limiting your enjoyment is part of readying yourself for retirement too.
It is claimed/reported by LeaseTrader.com that U.S. citizens/residents are moving out of the U.S. (and foregoing their leases) for monetary/financial reasons. “Lease escapes” in 2007 were 2.5% vs a projected 6.2% in 2011.
There’s a reversal of fortune here with the exodus occurring amongst American citizens. So where are people relocating to? Supposedly:
U.K., Brazil, Israel, Asian countries, India
This does not just affect retirees of course, but young, employable families as well. The data is culled or sourced from a car leasing company, LeaseTrader.com — so take it for what it’s worth. Interesting trend, if accurate.
@Bill – Yes, my wife and I find we can travel on less than it costs for us to live in the U.S. The key is what style of travel you enjoy. We like to connect with the local culture and travel similar to what you are saying. SVB also points out wisely it is a great way to search for cultures and locations you might like to plant yourself more permanently in.
@Krantcents – Yes, paying off your home is another good strategy to reduce risk and lower costs.