Are you running short on funds for retirement? Or maybe you have enough saved to cover basic expenses, but are having difficulty managing unexpected costs such as home or car repairs. If you find yourself in either of these situations, it may be time to think about ways you can reduce your expenses. Below are some strategies that may be able to help:
Having a plan
Having a solid plan in place is not only key to your retirement strategy, but it also gives you peace of mind. This includes having a backup plan as well, which could be especially important if you have another 20-30 years left in retirement. That’s a long time into the future, and many things can change between now and then, so it’s better to be prepared for the unexpected. Your plan should allow for a modest, but comfortable lifestyle. In addition, it’s critical that your plan is realistic and within your control. Therefore, it shouldn’t rely on external factors such as market conditions or good fortune.1
Cutting discretionary spending
Often times it’s easier to cut expenses than it is to increase your income. Even cutting your budget by 10-25% could make a difference without significantly affecting your standard of living.
For example, rather than dining out, it can be just as enjoyable and more cost efficient to cook healthy, tasty meals at home. When the weather is good, you can get a little fresh air by “dining out” on your patio. Barbeques and dinner with friends and neighbors can be less expensive and fun too.
If you’re spending extra cash on entertainment such as going to the movie theater, consider cheaper alternatives such as streaming movies and TV shows over the Internet.
Traveling can also be expensive, but smaller trips to nearby destinations can be equally entertaining. With a little research, you may discover a host of attractions that are within driving distance. If you live in an area that’s conducive to outdoor activities, then you may want to take up walking or riding your bike.
Reducing expenses doesn’t meant cutting these “extras” out altogether, it just means being a little more selective about your choices.1
Downsizing
Selling your house and using the proceeds to purchase a smaller, less costly home is another way to decrease expenses and generate additional retirement income. You can use any extra proceeds from the sale to pay off debt or save the funds to use when needed.1
If you find that these strategies aren’t enough, and are looking for another way to supplement your income, a reverse mortgage may be an option. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan. A HECM enables seniors age 62 and older to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3
If you’d like to learn more about reverse mortgages, please use our Reverse Mortgage Calculator or call 800-218-1415.
1 Running Low in Retirement: Expense Strategies – caniretireyet.com, by Darrow Kirkpatrick, 9/21/15, http://www.caniretireyet.com/running-low-in-retirement-expense-strategies/
2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
Author: Meredith Manz