Many people who are either retired or are approaching retirement are looking for ways to stretch their dollars in retirement, especially if they are living on a fixed income with tiny adjustments for cost of living.
Over the last few years U.S. food prices have escalated 40% (as the dollar loses purchasing power this trend will continue–it’s done so for 100 years). At the same time gasoline prices have skyrocketed, as have the prices of many other things that are important to daily living. Meanwhile, Social Security just announced a whopping 1.5% cost of living increase (see: Link). Tiny cost of living increases hardly begin to cover the escalating costs of every day commodities we buy to live on. What’s a retired person to do?
The government is broke. Because it is broke, it will continue to lie about inflation (understate the escalation in prices and the rate of increase in the CPI), while holding down increases to Social Security payments. Eventually Congress may be forced to restructure entitlement payments downwards in order to stave off bankruptcy and to deal with the masses of baby boomers who are now retiring in huge numbers. Meanwhile, the huge deficits and the infinite “Quantitative Easing” will continue to erode the purchasing power of the dollar (thereby driving up prices of almost everything). This is not good news for most seniors (it’s not good news for any American or anyone else holding dollars).
What can you do about it? There are many things you can do. Some of them are beyond the scope of this article. Let me suggest a few ideas that might be worth considering.
1) Eat more meals in. Buy bulk food to save costs. Shop at Costco and other wholesale stores. Reduce the number of meals you eat out. Buy cheaper cuts of meat.
2) Consider moving to a state that has lower taxes such as Nevada, Texas, or Wyoming. These states do not charge a state income tax. How much state income tax do you pay each year? If you didn’t have to pay that, what kind of a raise would that represent for you? For some people this is a significant amount.
3) Reduce your housing costs. For instance if you are living in an apartment, look for a lower cost apartment to live in. As an example, leave your $1,500 per month 2-bedroom apartment in Los Angeles (see: Link) and move to a $550 per month 2-bedroom apartment in Mesquite, Nevada. It’s possible you’ll save yourself $950 per month in living expenses with that simple change. (See: Desert Shade Apartments Link). By moving from California to Nevada you may reduce taxes and housing costs in one fell swoop.
4) Reduce transportation costs. Sell one car and try to live with just a single car. Or sell both cars and take the bus, a bike, or walk. Rent a car when you want to go on a trip. Live near to shopping so you don’t have to run your car all the time to buy something.
5) Reduce insurance costs. Can you eliminate a life insurance policy or reduce it? By eliminating a car you can eliminate some car insurance costs. If you move out of a house into an apartment you can get rid of fire insurance on a house. Now that it’s just the two of you, do you really need a house…can you make it better in an apartment?
6) Reduce travel and vacation expenses. Examine the trips you take and ask yourself if they are all necessary. Try “Staycations” rather than vacations. Reduce the travel radius of your vacations and see if that will save you money. Live in a warm place that feels like a vacation all the time. Find entertainment and relaxation near to home to reduce travel expenses. (See: Link or Link, or Link).
7) Make things last. I looked at the clothes in my closet and realized that I can’t possibly wear them out if I live to be 150 years old. I don’t expect to live that long. Do I really need to buy another scrap of clothing?
8) Make a game out of saving money. Thrift can help you to live on less and have more to save for a rainy day. Thrift can help you to stretch your retirement dollars. (see: Link).
9) Stop smoking, stop drinking alcohol, stop drinking soft drinks…any of these changes can save your health and save you bucks over the years. Are there other bad habits that are costing you money that you can give up?
10) Give up a pet. My dog was costing us $150/month in special food, $600 per year in vet fees, $250 per year in boarding costs, not to mention that we had to replace our carpet twice because of all the “accidents”. Saying goodbye to a pet may be hard, but it might be just the thing to save you several hundred dollars per month. (see: Our $100k Dog– Link)
11) Get out of debt and save the interest that you are sending to the banks. Interest is a cut in pay. (See: There Must be 50 Ways to Leave Your Lender– Link And see: How to Become Debt Free Without Destroying Your Lifestyle– Link). Sell the big home and downsize. By doing that you might save tens of thousands of dollars in interest payments. Perhaps you have enough equity in your home that you can move to a less expensive market and pay cash for a home, maybe even have some left over to buy a new car. Try it, you’ll like it.
12) Move to a low cost of living area. You will be surprised what a relief that is. You’ll probably find that the pace of life is slower, the costs are lower, and your blood pressure will fall. I bought the same size home when I moved to a lower cost of living state. My property tax dropped from $6,500 per year to $1,600 per year. That one item alone was worth the move to me. I hate property taxes!
13) Of course, if you don’t want to stretch your dollars, you can always figure out ways to make more of them. Don’t forget, that will move you into a higher tax rate. And, if you are receiving Social Security, you need to remember that if you are under the full retirement age, for every $2 over $15,120 of earned income the government will take away $1 of your Social Security income (see: Link). Furthermore, under the Obama Administration, tax rates have increased. (See: Establish Multiple Sources of Income–Link)
When you add up just the few ideas I’ve listed above you’ll see that a few changes to what you are currently doing can save you a truck load of money. Perhaps some of the more draconian things suggested will be things you’ll just do for a while. Other items you may wish to turn into new permanent habits. You have the power to survive and thrive in retirement by rethinking the things you’ve always done and making some creative changes.
See also: Lower Cost Retirement Living, Mesquite, Nevada– Link
Mesquite, Nevada, The Best Kept Retirement Secret in the U.S.A.– Link