According to the Social Security Administration, the median annual household income for married couples over 65 was $50,772 in 2013. However, the U.S. Census Bureau reported recently that the median annual income for those between 55 and 64 was over $57,000. That's good for a nearly 12% reduction in income.
If you're already in that boat, or if retirement is fast approaching, it's time to figure out how you can save some money in retirement. We asked three of our regular investment and retirement planning contributors to offer up a way to save money in retirement. Here's what they had to say:
Time to trim the fat
Selena Maranjian: One smart way to save money in retirement is to downsize. You can do that in more than one way, too. For example, if you're married and your household has two cars, you might get rid of one and share the other. It's not possible for all couples, but if you can swing it, you can save a lot on insurance, fuel, and repairs.
You might also downsize your home. A smaller house will likely cost you less in mortgage payments or rent, property taxes, insurance, utilities, repairs, and upkeep. There is, though, the not-insignificant trouble of packing up and selling your current home and buying, moving to, and setting up a new home. Downsizing can save you a lot of money, but it's easier said than done. The move itself can be costly, and you'll likely have to spend a fair amount of time paring down your belongings, too.
Another possibility is to not just move to a smaller home in the same general area but to move to a different region entirely. According to Wallethub.com, the average American household faced $2,089 in property taxes in 2015. But consider that the average rate in Illinois was $3,939, while it was $3,971 and $3,327, respectively, in New Jersey and Texas. Meanwhile, it was only $1,089 and $984, respectively, in Colorado and South Carolina. Moving away from many friends and family is a big deal and not to be undertaken lightly, but do consider relocating if you have sufficient family and/or friends in regions with lower costs of living. (Look beyond property taxes -- to income taxes, sales taxes, costs of utilities, home prices, and so on.)
There are lots of ways to downsize, and some of them might save you a lot in retirement.
Hopping over the pond
Dan Caplinger: One extreme cost-cutting measure that an increasing number of retirees have done is to move overseas. The expatriate lifestyle isn't for everyone, but depending on where you decide to live, it can be a lot cheaper to meet your basic living expenses than it is just about anywhere within U.S. borders. In particular, with the recent strength of the U.S. dollar, living in many parts of the world has gotten a lot cheaper over the past couple of years.
Savings can come from a number of sources. Housing, transportation, and even medical care can be much less expensive than you'll find domestically. Yet you don't necessarily have to give up the social aspects of living in a community with Americans, as many regions of the world have become favorites for expatriates and have therefore built up a considerable local population of former U.S. residents.
Moreover, even if you have family and friends within the U.S. whom you want to visit regularly, the savings from lower overall living expenses can be enough to pay for the extra costs of airfare to and from an international destination from time to time. Whether you have limited funds or just want to experience another culture, living abroad in retirement can help you achieve dreams you never knew you had.
Border hopping: Domestic edition
Jason Hall: If you're open to relocating but jumping over the pond isn't in the offing, a move to another state with no (or very low) income taxes may work just fine.
As fellow Fool Matt Frankle wrote earlier this year, there are seven states with no state income tax, including Florida, Alaska, Nevada, South Dakota, Washing State, Wyoming, and Texas, and two that only tax interest and dividend income, New Hampshire and Tennessee.
One word of caution before you make the plunge and move: Explore how the states you are considering cover the revenues that other states get from income tax.
For example, Texas, Wyoming, and Alaska all have major oil, gas, and coal revenues and royalties, while Nevada's major gaming and entertainment industry produce huge revenues for the state. In these cases, state residents benefit from these income sources, lowering their cost of living. Washington State, however, counts on higher sales and gas taxes for revenues, while Florida and New Hampshire have some of the highest property taxes in the U.S.
In other words, no income tax may not mean lower total taxes. Look before you leap if you're counting on cost savings as part of your relocation to an income tax-free state.
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