Are you counting on your living expenses taking a nosedive in retirement? If so, you might be surprised to learn that most seniors only spend $1,000 less per month than their younger counterparts, for an average monthly spending of $3,800.
The reason behind seniors’ high spending isn’t that they’re living large in retirement. Rather, it’s because while spending decreases in some categories, it goes up in others. And unfortunately, the categories where costs rise are some of the most expensive.
These are the biggest budget items you’ll face in retirement, along with tips for saving money without sacrificing the golden years you’ve worked so hard to achieve.
As housing prices go up, it’s getting harder and harder to retire without a mortgage. Even if you do pay off your mortgage before retiring, you’ll still be responsible for property taxes, insurance, utilities, and home maintenance. On average, seniors pay $1,322 for housing — that’s almost as much as the average Social Security payment. In high cost-of-living areas, seniors are even more burdened by high house payments and rising property taxes.
If housing is eating up too much of your budget, it might be time to downsize. Smaller homes cost less to buy and maintain on average, especially if you avoid high homeowners association or condominium association fees. If you can’t bear the thought of selling your home, convert part of it into a vacation rental or get a roommate.
Do property taxes have you stressed? Consider a move to an area with lower property taxes. In some cases, simply moving across the county line can lead to big savings.
If you think Medicare is free health insurance, you’re in for a shock when you enroll at 65. While Medicare Part A is free for seniors with enough work credits, Medicare Part B premiums start at $135.50 a month, plus deductibles and copays, with higher premiums for high-earning seniors. Since these plans don’t provide comprehensive coverage, most retirees also buy a Part D plan for prescription drug coverage and either a Medigap or Medicare Advantage plan to fill in gaps.
You could forgo supplemental coverage and stick with Part A and Part B to save on premiums. However, most people need more healthcare as they get older, not less, and this strategy could stick you with high out-of-pocket costs.
Unless you’re in excellent health, opting for supplemental coverage is the more financially prudent choice. If you don’t mind sticking within a network, Medicare Advantage plans offer the best overall value for your dollar. Medicare Advantage premiums start at $0, and plans include a variety of supplemental benefits. Anthem’s MA plans, for example, include Part D coverage as well as vision, dental, and hearing benefits.
Once you’re retired, you no longer have to buy gas for your daily commute. However, while transportation costs go down, transportation is still among a senior’s biggest expenses. Transportation costs can be especially burdensome if you have to stop driving. Without access to adequate public transit, you’re left to rely on taxi and rideshare services, which are costly.
In the short-term, get rid of your second vehicle to save an average of $2,696.50 a year on insurance, maintenance, and registration costs. If you’re still making payments on a car, trade it in for a reliable used car with good gas economy.
Unfortunately, these tips won’t help you if you have to give up your driver’s license. If you want to get around easily and affordably when you’re older, move to an area with public transportation and walkable neighborhoods.
When you’re living on a fixed income, you have to be conscious of where every dollar goes. However, that doesn’t mean you have to pinch pennies in retirement. By making smart budget decisions, you can reduce your retirement spending and enjoy a fantastic retirement lifestyle.
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