For the vast majority of people considering retirement, one question looms above all others: Have I saved enough to make the dream of retirement a reality? Tough question, given that it is impossible to predict how long we will live and what future costs we might incur (particularly with regard to health care).
An article in U.S. News & World Report provided the following strategies for retirees to cut monthly expenses and make their life savings last longer.
Pay off your mortgage
Eliminating monthly mortgage payments is of the best ways to make retirement more affordable. While you will still have to pay taxes and maintenance costs on your home, these expenses are most likely a fraction of your mortgage payments.
Downsize your home
When your children have moved out and become independent, do you really need that house with several bedrooms in a community with good schools and large yards? Downsizing to a smaller home in a less expensive community can go a long way to increasing your nest egg and lowering your monthly expenses
Sell one of your vehicles
When you and/or your spouse commuted to work every day, each of you probably needed his or her own car. In retirement, you may find this is no longer the case. By selling one of your vehicles, you eliminate the insurance, maintenance and fuel costs associated with it. If you live in or move to a community with excellent public transportation, you might not even need a car at all.
Cut your tax bill
While you will need to pay taxes on withdrawals from individual retirement accounts and a 401(k), thoughtfully spacing out your withdrawals can help avoid a large tax bill at year’s end. Prepaying income tax on retirement savings by using a Roth 401(k) or Roth IRA can reduce your tax liability as well.
Avoid high investment fees
Many mutual funds and other investments charge high fees. For retirees living primarily off of income from their portfolios, minimizing investment costs is particularly important. Investing in lower-cost funds that meet your objectives means more money in your pocket.
Withdrawing money from your retirement account too soon or too late can lead to substantial penalties. In addition, taking Social Security payments as soon as you can reduces your benefits in the long run. You will also be penalized for late enrollment in Medicare Parts B and D.
Minimize health care costs
While none of us can predict our future health care needs, there are some ways to control costs. For example, you could purchase a supplemental policy to Medicare to cover cost-sharing requirements associated with traditional Medicare. Shopping for a new Medicare Part D plan annually can ensure you are getting coverage for medications at the best possible price.
Take advantage of senior discounts
Senior discounts at restaurants, movies and museums are highly publicized and widely known. Others are not. Don’t be afraid to ask for a senior discount.
Read the U.S. News & World Report’s entire article on reducing retirement costs.