Tips For Reducing Expenses During Retirement

Retirement can mean fun and freedom. But for many retirees, it also means living on a relatively fixed income. Reducing expenses both before and after you’re retired is key to maintaining a comfortable lifestyle while ensuring an ample income. Here are some tips for keeping expenses down in your post-retirement life.

  1. Eliminate debt. Pay off as many debts as possible before exiting the workforce. Eliminating your mortgage, car payment, and credit card balance gives you more money to spend in retirement.
  2. Downsize your home. Once your kids are out of the house, you don’t need a big house in a good school district. Consider downsizing to something smaller with less maintenance.
  3. Exit expensive cities. Consider moving to a locale where your retirement dollars will stretch further. Look for places with lower taxes, more affordable housing, and plenty of amenities for seniors, such as great healthcare facilities and affordable recreation.
  4. Sell one of your cars. One of the biggest perks of retirement is not having to drive to work every day. Depending on where you live, you may find that you no longer need a second car. It will also cut insurance and car maintenance bills.Get rid of pay TV. Many people are cutting back on the TV channels they hardly ever watch. Consider reducing the number of channels you pay for, making do with broadcast TV, or watching TV programs over the Internet.
  5. Delay Social Security payments. You may sign up for Social Security benefits beginning at age 62, but check amounts are reduced up to 30 percent for those who claim benefits before full retirement age – which is 66 for most people. Retirees must wait until age 66 to claim their full entitlement. If you can wait until age 70 to start your benefits, you’ll receive an increase known as “delayed retirement credits”.
  6. Sign up for Medicare on time. You can sign up for Medicare during a seven-month period beginning three months before your 65th birthday. Fill out an application right away to avoid a Medicare Part B premium increase of 10 percent for each 12-month period of delayed enrollment.
  7. Find the best prescription drug plan. Every year, the premiums, deductibles, and cost-sharing provisions of Medicare Part D prescription drug plans change. Compare expected out-of-pocket costs for necessary drugs under all the plans available in your area at medicare.gov. You can switch plans once a year during the open-enrollment period.
  8. Take required minimum distributions. Those age 70½ or older must take withdrawals from retirement accounts each year. The penalty for failing to take out the correct amount is steep: a 50 percent tax penalty and income tax on the amount that should have been withdrawn.
  9. Spend taxable accounts first. You don’t have to pay income tax on the funds in your 401(k)s and IRAs until the money is withdrawn. But some types of gains outside retirement accounts are taxed each year. Minimize your tax bill by spending money outside your retirement accounts first.
  10. Scrutinize investment fees. Fees and expenses diminish investment returns. Even after you retire, it pays to seek out investment options with lower expense ratios and fewer fees. Also, take care to avoid banking fees in general, including transaction fees and ATM or overdraft charges on your checking account.
  11. Travel smart. Working folk tend to do most of their traveling during weekends and national holidays. Seniors have the luxury of being able to travel on weekdays and off-peak times and take advantage of last-minute deals.
  12. Utilize age-related tax breaks. Some states exempt pension income from state income tax. Other locales offer age-related property-tax exemptions or deductions. Contact the state department of revenue or a local tax expert to find out about tax breaks for seniors.
  13. Ask for senior discounts. One of the greatest perks of getting older is qualifying for senior discounts. Don’t be shy - take advantage of them! That includes reduced rate public transportation and early-bird discounts.
  14. Don’t spoil your grandchildren. Grandchildren are money magnets. Resist buying them expensive gifts and treats. Instead, offer your baby-sitting services. You’ll get to hang out with your grandchildren, and their parents will appreciate having some time to themselves.

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