Though retirement can be a rewarding period of life, it can also be one that's financially taxing. An estimated 33% of senior households either have no money left over each month after paying their bills, or run into debt each month because their income can't cover their basic costs. That's why it's crucial for retirees to be mindful of their spending, especially if they're not working part-time and don't have a means of generating extra income. Here are just a few things that tend to cost seniors way too much money.
1. Maintaining an expensive home
Not all seniors choose to downsize once they stop working. If you like your neighborhood, and want the option to offer your adult kids (and their kids) lodging when they come to visit, then hanging onto your home might seem like a good idea. The problem, however, is that as homes age, they get increasingly costly to maintain, and if you're not careful, you could end up blowing a large chunk of your (limited) income on upkeep alone.
The typical homeowner spends anywhere from 1% to 4% of his or her home's value on maintenance, but if your property is older, it stands to reason that you might hit the top end of that range. Furthermore, as you age, you might see an increased need to outsource your maintenance if you aren't physically able to do so yourself, and that'll only add to your costs.
That's why it often pays to downsize your home in retirement, even if it's already been paid off in full. In fact, if you really want to play it safe, find a smaller condo or townhome you can buy outright in cash that comes with fixed maintenance costs (which many do). Though your maintenance fee typically doesn't cover repairs specific to your individual apartment, it limits your exposure to major unplanned expenses, like roof repairs.
It's one thing to enjoy the occasional game of Bingo, but spending a chunk of your income on gambling is a completely different story. Not only are seniors spending more and more in casinos, but a growing number of retirees are quickly becoming addicted.
And it makes sense, to an extent. Retirees are most likely to have free time on their hands, so rather than sit at home, many are drawn to casinos. But if you're not careful, what starts as an innocent way to spend the day could turn into a full-blown problem that leads you to hemorrhage money.
A better bet? Limit the amount of time you spend at casinos, and don't bring credit or debit cards along when you gamble. Rather, decide in advance how much you're comfortable spending for the day, bring only that much in cash, and limit your losses from the start.
Though healthcare is a necessary expense for seniors, it's also one that many of us have the ability to control to a certain degree. Or to put it another way, if you're not careful, you could end up overspending on medical care and wrecking your budget in the process.
The first thing you can do is sign up for Medicare on time. Your initial enrollment period begins three months before the month of your 65th birthday, and it ends three months after the month of your 65th birthday. All told, you have seven months to sign up, so there's really no excuse for being late -- especially since missing that window will result in a 10% increase in your Part B premiums not just temporarily, but for life. You'll also get penalized if you go 63 days or more without a Part D prescription plan in place, so pay attention to your enrollment deadlines and sign up when you're supposed to.
Furthermore, be sure to reevaluate your drug plan each year to make certain it's still the right one for you. It could the case that the medications you're taking are cheaper on a different plan, so do your research before locking in your decision. Finally, talk to your providers about keeping your medication costs as low as possible. It may be the case that there's an alternative or generic option available that'll cost you less out of pocket, so be proactive about keeping your prescription costs to a minimum.
Most retirees need all the cash they can get (or keep). By steering clear of these potential money-wasters, you'll avoid the financial stress so many seniors face.