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How to Cut Your Expenses in Retirement

The average person needs between 70 and 80 percent of their income each year when they retire. If you have that already saved, you're probably in good shape. how to cut your expenses in retirement

However, there's always more you can do to help you stretch your retirement funds without sacrificing your quality of life. It just takes planning and know-how.

If you're wondering how to save in retirement, you're not alone. Here are a few simple methods you can implement to cut your expenses, free up income, and help you live the life you deserve.

Look at What You Spend Each Month

The best place to start figuring out how to save money in retirement is by looking at what you're spending every month.

This should include everything from mortgage payments to going out to eat. Do this for at least three months so you can gain a more accurate picture of your regular expenses.

Once you have that number in mind, think about the types of expenses you can cut out. Are you paying for streaming services you don't use? Do you spend more on your home insurance policy than you should?

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Identify those expenses and cut them out now. You can then use the money you were spending to improve your savings or add to your investment portfolio to generate more retirement income.

Pay Off Your Debt A.S.A.P.

One of the most significant strains on your budget is debt. Not only do you have to repay the money you spent or borrowed, but you also have to pay any interest accrued on your debt. It's the interest that's a huge problem.

The longer you carry debt, the more the interest builds up. This can significantly increase the amount you end up owing on your mortgage. Over time, it can become overwhelming.

Instead of carrying that debt throughout your retirement, start making a plan to pay it off. The sooner you get rid of it, the more money you'll have on-hand to spend on the things you enjoy most.

Get Rid of Bad Habits That Hurt Your Health

Everyone has vices, but some are more harmful to your health and bottom line than others. For example, a person that smokes a pack a day will spend about $2,292 per year on cigarettes. 

That's not including any medical treatments for conditions aggravated by that regular smoking habit.

That's more than $2,000 that you could use to go on vacation, make improvements around your house, or just enjoy a few nice dinners each month.

The sooner you can start cutting out bad habits, the better off you'll be. Not only will you save the money you'd otherwise spend buying the products themselves, but you'll also improve your health.

Remember, medical care is one of the biggest retirement expenses you'll face. The healthier you are during retirement, the less money and time you'll spend on medical care.

Are you over the age of 60? Did you know that healthcare is likely you biggest unknown expense in retirement? Check out our simple 3-step Medicare guide that could save you thousands in surprise medical bills or penalties.

Move Out of the Family Home

As you approach retirement, you might not need the amount of space you did when your family still lived at home. The bigger your house is, the more money you'll spend on maintenance, upkeep, and utility costs.

Instead of growing old in that oversized house, consider downsizing into a home that's a more manageable size.

You don't have to go tiny. Think about the amount of space you realistically need. For example, do you need a three-car garage when you only have two cars at home? Do you need five bedrooms when it's just you and your spouse?

Moving into a smaller home will often lower your monthly expense. As a bonus, you can make additional money by selling the furniture you don't want to keep.

Sell Your Second Car

If you and your spouse both work full-time jobs, you both likely have to commute every day. This means you'll need two cars to make the trip manageable. However, when you retire, you get to ditch that commute entirely.

When you're not commuting, you'll likely be able to get by with just one car. Selling your second car can help you save money on your car insurance and registration fees each year.

If you do need a second car for any reason, consider selling the car that's the least fuel-efficient and replace it with one that gets more miles to the gallon. This way, you'll end up saving money on gas every time you drive.

Just remember to replace the car with one that has the same or lower payments than your older model so you won't have to change your budget or adjust to a new, higher expense.

Embrace Senior Discounts

You may not like advertising your age, but senior discounts can save you between 5 and 25 percent on certain services. You may qualify for discounts on travel, food, and even entertainment every day.

This can go a long way toward helping you lower the overall cost of retirement. That said, you may need to ask for those discounts. 

Now You Know How to Save Money in Retirement

The secret of how to save money in retirement is living within your means. Don't hesitate to reexamine your budget even after you retire to make adjustments as needed.

If you find that you're spending less money than you thought you would, great! You can set that money aside to pay for a vacation or to support a charity you believe in.

Should you find that you're spending more than you want to, rein it in and get your spending back under control. As long as you take the time to review your finances every month, you should be in good shape.

If you're looking for information on creating additional income in retirement, you can also check out LowerMyBills' breakdown of Reverse Mortgages that can provide consumers over the age of 62 a viable stream of income.  

So there you have it; some great tips for cutting costs in retirement. Let us know what costs your cutting in retirement so that we can share those with others as well. Best of luck!

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About the Author

Aurtho Clint Haynes, CFPThis article was written by Clint Haynes, CFP®. Clint is a Certified Financial Planner® and Founder of NextGen Wealth. You can learn more about Clint by reading his full bio here.

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