Many seniors worry about running out of money in retirement. And that's a valid concern.
The truth is, you can save diligently throughout your career, but if you're not careful about how much you spend as a senior, you nest egg can quickly get depleted. That's why it's important to not only follow a retirement budget, but aim to keep your expenses as low as possible. And here are a few ways to accomplish the latter.
1. Move to a less expensive home
You'll often hear that downsizing makes sense in retirement, since a smaller home is apt to cost you less money to live in and maintain. But actually, when it comes to housing costs, less square footage doesn't necessarily mean less of an expense. If you trade in your 2,500-square-foot suburban home for a 600-square-foot apartment in a major metro area, you may find that the latter results in a higher mortgage payment.
Rather than focus on the size of your home, aim to simply spend less on a home. Downsizing might help you accomplish that goal, but you may also find that if you move from a 2,500-square-foot home right outside a city to the same-sized home in a more rural area, your expenses -- namely, your mortgage and property taxes – will go down. (And to be clear, not every senior manages to enter retirement mortgage-free, so you may indeed have housing payments to contend with once your career ends.)
2. Relocate someplace with more favorable tax treatment
The state you move to could dictate how much money you're forced to spend on taxes in retirement, so relocating strategically could really cut your costs. You may want to consider choosing a state with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming all fit this bill. You may also want to choose a state that doesn't impose taxes on Social Security benefits. Right now, there are 13 states that fall into this category.
3. Move to a walkable city
It costs an average of $9,282 per year to own a vehicle. If you're able to live someplace in retirement that doesn't require you to have your own car, you could save a fortune. Plus, all of that walking is apt to be great for your health, so you might shave down your medical costs as an added bonus.
Keep in mind that even if you move someplace where a car isn't required, you may not be able to walk everywhere. The good news, though, is that public transportation is often discounted for seniors, so you may find that you still save a bundle even if you wind up taking the bus three times a week.
4. Choose the right Medicare plan
Healthcare is another major expense for seniors, but you can keep your personal costs down by choosing the right Medicare coverage. If you stick with original Medicare, you'll need to select a Part D drug plan every year. Researching your plan choices could result in major savings -- think lower premiums and copays.
Another option you might consider is enrolling in Medicare Advantage instead of original Medicare. You may find that your premium costs and out-of-pocket expenses are lower with Medicare Advantage, especially since Advantage plans generally cover key services like dental care, vision exams, and hearing tests, whereas original Medicare does not.
5. Seek out free entertainment
When you're no longer working, you'll need something meaningful to do with your time. And to that end, the more creative you are in seeking out free entertainment, the less financially strained you'll be.
To get started, think about your interests. If you're the outdoorsy type, you can explore free parks or hiking trails in your area, or see if it's possible to get involved in a community garden. If you like culture, look into free classes or concerts at community centers or free admission days at local museums. Of course, this isn't to say that you can't or shouldn't treat yourself to the occasional afternoon at the movies or the mall. But if you make a point to pursue free entertainment, you'll stretch your savings nicely.
You deserve to spend your senior years feeling financially secure. Make an effort to keep your retirement expenses to a minimum, and you'll have less to worry about as you navigate this new and exciting stage of life.