Are You Ready for the Post-Retirement Income Drop?

Baby boomers need to prepare for reduced-income lifestyle

Apr 13, 2014 at 12:10PM

Most people are aware their income level will decrease somewhat after they retire, though they probably don't know by how much. The conventional wisdom dictates that retirees will need approximately 80% of their pre-retirement income to enjoy a comfortable lifestyle.

That benchmark may be a little too optimistic, however. Using U.S. Census data for 2012, the AARP notes that the dip in household income for those over the age of 65 is much steeper than that for persons aged 45 to 64. In states like Massachusetts, income drops by an astounding 52% percent, and retirees in Washington, D.C. take in only 72% of their former annual income.

For boomers approaching retirement, pruning expenses early on can help make that reduced income go farther, without sacrificing comfort. Here are a handful of ways you can start cutting costs now in preparation for the big day – and creating a little extra cash every month right now to put toward your future.

1. Get tough with your cable company
A recent article in Consumer Reports noted that cable bills have surged in the past 15 years, outpacing inflation. But there is a way to avoid handing over outrageous sums to your cable company every month: just ask.

The magazine gives ample evidence that negotiating with cable companies nets results, with 46% of survey respondents saying they received a substantial reduction on their bills. Many more were able to procure extended introductory rates, or score free equipment.

2. Reconsider your transportation needs
For couples, retirement may mean being able to reduce the family fleet to one vehicle – a great savings when insurance and fees are factored in. If this is your plan, consider buying a new car and financing the purchase so that it is paid off when you retire. Time your purchase to get the best deal; for example, shop in late summer, when many automakers offer special pricing or financing terms in order to move leftover vehicles in time for the new models to arrive.

3. Plan to cut auto insurance costs
When you retire, that new car won't be quite so new anymore, and the loan will be paid off. Prior to retirement, take a second look at the insurance policy, and decide if you will still need things like collision insurance. In addition, check with your insurer to ask about discounts for low mileage, since, once you're retired, you won't be commuting to work every day.

4. Don't scoff at bagged lunches and early bird specials
Going out to eat can get expensive, and you can drop a lot of money each week on pricey cappuccinos and buying your lunch every day. Bringing coffee and lunch from home can be a real savings.

If you like dining out on the weekends, try breakfast or lunch – both of which are usually much cheaper than dinner. If you do eat supper out, don't forget about those early bird specials.

There are undoubtedly many more ways to start saving early, depending upon your particular lifestyle. With a little planning and creativity, you should be able to bridge the income gap, and glide into retirement without even feeling the pinch.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it’s not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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