Retirement shouldn't be a time when people stress about money every single day. We have worked our whole lives to get to a point of not having to worry or stress about making ends meet. If you have not saved enough or invested enough for retirement, we are going to break down some needed tips if you just want to retire on Social Security.
I get scared by people's stories of having only $100,000 saved up and being 68 and ready for retirement, so I am hopeful that these tips can help motivate you to make some changes.
1. Start Saving Early
It can be easy to say to start saving early, but the truth is that the time is now. If you are approaching retirement, it is time to start cutting costs and start saving.
Even if it is a little bit, saving can help you survive when Social Security may not be enough. Cutting down on expenses can show that you can spend less money on the things you need.
2. Delay Claiming Social Security Benefits
More money means fewer problems. People can start getting Social Security at age 62, and then the maximum benefit is at age 70. Your benefits can be reduced anywhere from 25-30% if you start taking them at age 62. If you start taking them at 70, that benefit can increase by up to 125%. If you are looking to only use Social Security as your primary source of retirement income, then try to work a bit longer until age 70 to get the most you can.
3. Minimize Your Debt
Debt is often seen as the killer of wealth. That makes sense. You constantly pay the banks and financial people monthly until that debt is paid off. Credit card debt can be a massive killer with high interest rates, and the ability to not spend can create immense stress.
Take some time and create a plan to pay off as much debt as possible. That could even be your mortgage debt. Even downsizing your home can elevate some of those financial stresses in life.
4. Cut Down on Living Expenses
One of the best things you can do to help with a money situation is to spend less. It sounds easier said than done, but you have to think differently about your expenses. People do not like the word budget. It makes sense: You have to limit your spending in categories that you have been spending for years on.
So, how can you start to limit your spending? Start with a Google sheet, a piece of paper, or something else to track your spending. It can be done with Excel or anything else useful for you. Then, see where you are overspending and start to limit that amount. Making these necessary cuts can help you in the long run.
5. Consider Part-Time Work
At the time of Retirement, you may not want to work anymore. The fact is that Social Security may not be enough for you to survive, so getting a job could be the most beneficial of all.
The fact that you have some monthly income coming in can help with your finances. If you do not have many investments, this could be the way you make ends meet. There are plenty of places that will hire retirees. The cool plus is that it will help you stay active and have something to do with your time. Playing golf and going fishing could be your hobbies of choice, but with some extra cash coming in, at least you will have something helping to pay for those hobbies.
6. Plan for Healthcare Costs
Healthcare costs can be a significant expense in retirement, so it's crucial to start planning for them now. Even with Medicare, out-of-pocket costs like premiums, copays, and deductibles remain, which can significantly impact our wallets.
One way to prepare is to consider a Health Savings Account (HSA) while working. The money that is put into an HSA is tax-free and rolls over year after year, so you can save up for healthcare expenses in retirement. The bonus is that the HSA could also be used as an investment account . Some of the money can be invested into ETFs that can help create significantly more wealth in retirement.
You might also want to look into supplemental insurance policies to cover what Medicare doesn't. Remember, healthcare is essential to your retirement planning, so ensure it's on your radar.
7. Create a Retirement Budget
We have talked about cutting down on expenses. Now, it is time to talk about a retirement budget. You will no longer need to eat out for lunch, drive to work, or even have clothes you need to spend money on. These costs can be eliminated.
Now, it is time to effectively budget out what you can spend money on. What are the things you like to do? This is a chance to make an effective plan for your money. Always plan for costs to go up as inflation goes up every year.
8. Understand Your Social Security Benefits
Social Security is a significant part of most people's retirement income, so it's important to understand how it works. The amount of your benefit depends on your lifetime earnings, the age at which you start receiving benefits, and how long you expect to live.
You can start taking benefits as early as age 62, but the longer you wait (up to age 70), the larger your monthly benefit will be.
So, it might be worth delaying if you can – remember that social security benefits are subject to federal taxes, so factor that into your retirement budget.
Understanding your social security benefits can help you make more informed decisions about when to retire and how much you'll need to save.
9. Take Advantage of Senior Discounts
One of the perks of growing older is the availability of senior discounts, who doesn't like some good senior discounts? My father-in-law always brings his ID in order to grab senior discounts at various places like retailers, restaurants, and service providers.
For example, stores like Goodwill and JOANN give you a percentage off your purchase on certain days. Goodwill gives anywhere from 10-30 percent off on those days, which can be a huge savings for the many seniors. Also, some airlines and hotels offer discounted rates for seniors.
Even some movie theaters and restaurants have special prices for the older crowd. So, don't be shy about asking for a senior discount – it's a simple way to save money and stretch your retirement budget further.
10. Consider Relocating to a Less Expensive Area
Many people think living in your home all of your life could be the best thing, but if your home has increased in value so much that you could sell it and move to a cheaper area, you may do that instead.
There are people who will sell their homes in New York and move to Florida. Florida has no income taxes, better weather, and cheaper real estate compared to New York. This makes financial sense, as you can save and live a much better life in a cheaper location.
When you are getting ready to retire, consider the advantages of moving to a lower-cost-of-living area.
11. Invest in Long-Term Care Insurance
As we age, the likelihood of needing long-term care increases – this kind of care can be expensive and quickly drain your retirement savings. One way to protect yourself is by investing in long-term care insurance.
These policies can help cover the cost of home health care, adult day care, assisted living, or nursing home care. It's important to consider this option early, as premiums often increase with age.
While it's an additional cost to consider, having long-term care insurance can provide peace of mind, knowing you're financially prepared for future healthcare needs.
12. Stay Financially Educated
Just because you're retired doesn't mean you should stop learning about personal finance. Staying financially educated can help you make smarter decisions with your money. Keep up-to-date on changes to tax laws, social security benefits, and investment strategies.
Read financial news, attend webinars, or even take a class – the more informed you are, the better equipped you'll be to manage your retirement funds efficiently.
Plus, staying engaged in this way can keep your mind sharp, which is an added bonus. Remember, retirement is not the end of your financial journey; it's just a new phase.
Final Thoughts
Retirement is a significant life event, and planning for it is essential. By following these tips, you can prepare yourself financially and make the most of your retirement years. All it takes is to start early, stay informed, and be flexible. With proper planning, you can create a fulfilling and financially secure retirement that allows you to enjoy your desired lifestyle. So don't wait – start planning for your golden years today!
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I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.
