This guest post was written by Arjun of Investing Thesis: Credits Toward Financial Freedom – a personal finance and investing site from a Canadian perspective. If you like this article, I encourage you to subscribe to their site.
Not all of us will retire well-to-do and comfortable for the rest of our lives. In fact, since the chaos caused by the recession, many people who thought retirement was just around the corner were very wrong and finding out you can’t retire when you planned can be devastating news. Finding a new job or staying longer at your old one may not have been in the cards but for some, it is the only alternative for staying afloat in a world of rising consumer prices and lowered incomes. If you have suffered through some unfortunately financial times on the road so close to retirement, there are still some practical tips that will allow you to retire as you intended by cutting down the costs of living and by spending more wisely. Here are some tips to help you retire on schedule and still enjoy the rest of your life without much financial worry:
1. Senior Discounts Save Money
For some, asking for a senior discount is a hard thing to do. But pride be gone – senior discounts should be considered a financially-savvy move rather than an age reminder. There are so many businesses that offer special perks to seniors, many of which are well-advertised and beneficial. But more often than not, companies that do not advertise will still offer price discounts or other incentives if customers ask. Dine out during the early-bird specials and keep your eyes peeled for other local businesses offering weekly incentives.
2. Smaller Home, Smaller Bills
While you may be mortgage free, it still may not pay for you to live in a large, multi-room home that you rarely use or need the space you once did. Typically the largest expense is still the maintenance on a large home. The yard still needs tending, the furnace needs to be cleaned, the utility expenses may be unnecessary in a larger home that now just houses one person or a married couple. Consider downsizing your house once the kids are out of the family home. Depending on your preference, you may choose to move to a smaller home or even a condo where no yard work or other maintenance is required. Look for properties in other areas that are more affordable and more manageable since you no longer have to consider school districts or the proximity to other things you no longer need to do. All of the extra income you make from the sale of your home should be invested into your retirement nest egg for additional security in retirement.
3. Investment Fees Can Bite
Investment returns laden with fees and other expenses can be drastically reduced. Even after retirement, you might want to check out other investment options that have fewer fees. Have an understanding of how much in fee expenses you are paying out and how it can impact your overall retirement funds. Even bank fees like those imposed on checking accounts, overdrafts, and ATM usage can eat away your savings for retirement.
4. Retirement Distributions: Take the Minimum
If you are 70 ½ years or older, you are required to take minimum distributions from your retirement accounts annually. The amount is calculated by dividing your individual retirement account and any 401k balances by your IRS-determined life expectancy. If you do not take the required amount, you can face a steep 50% tax penalty plus and additional hit when the income tax is place on the amount you should have withdrawn.
5. Get on Board with Medicare
Three months before your 65th birthday, you can sign up for Medicare coverage. Be sure to complete the application in a timely manner to avoid premium increases of 10% for delayed enrollment. If you are still working and have health coverage, you need to sign up within an eight month period once you leave your job or you will be penalized.
6. Spoil the Grandkids With Time, Not Money
Any grandparent could potentially go broke trying to keep up with the latest and greatest products being marketed to kids. Sure it’s fine for grandma and grandpa to buy nice things for their kin but spending needs to be controlled. Now that you are in retirement and have more time on your hands than you know what to do with, choose to spend time with the kids rather than spoil them with material goods.
7. Travel Smart
One of the perks most people consider during retirement is the ability to travel without time constraints. Even if you are working on a tight retirement budget, travel is still possible. Work to cut out expenses you no longer even use like full package cable television or two vehicles. Find ways to supplement your travel account and plan ahead. There are many kinds of trips that are planned especially for seniors so check with a travel agent. Plan to travel on off-peak times and days to get even more savings. But do plan to do something fun for yourself during your retirement years.
Retirement has become a time not everyone is looking forward to out of financial fears but it is never too late to start paving the way for a more golden ‘Golden Years’. If you are the child of a parent approaching retirement, you can do your part to help them comparison shop using the Internet or keep them updated about other money saving tips they are not aware of coming from a different generation.
How do you plan on cutting expenses for retirement?