As a retiree, you're probably going to rely on Social Security and your investments for support throughout your later years. It's not easy (and often not possible) to substantially increase your income from either of these sources once you've retired. So you'll likely have a fixed amount of funds available to you.
When you have a limited income and making more money isn't as easy as just doing a little overtime at work, it's especially important to be wise about what you're doing with your funds. That's why you can't afford to ignore even small extra costs you could get stuck paying.
In particular, here are three seemingly small expenses that could eat away at your retirement security.
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1. Insurance premiums
You obviously need to have insurance as a senior. This includes not just medical insurance, but also auto and homeowner's insurance if you drive and own your own place, or renter's insurance if you rent.
Unfortunately, insurance premiums have been rising and this can become a real financial burden. And, if you don't shop around for insurance coverage, your situation could be even worse. That's because insurers have actually been known to penalize loyal customers by raising rates on those they feel are the least likely to shop around for coverage.
To make sure you aren't paying higher insurance premiums than necessary, you'll want to shop around for insurance policies at least once a year and make sure you're getting the best deal available for your current situation. You don't want to skimp on coverage, but you can use a car insurance calculator to estimate what you should pay and get quotes from at least three insurers each year to find the lowest price policy offering full coverage from a trusted insurer.
2. Bank fees
As a retiree, you're likely going to rely on a lot on your 401(k) or IRA as an income source. But you generally aren't going to spend directly from those accounts. You'll need to have your withdrawals deposited into a checking account and will also need your Social Security checks put in the bank.
Unfortunately, your choice of bank could cost you if you don't do your research. That's because many banks charge high fees for basic services like maintaining an account or using an ATM to withdraw funds. Banks collect around $9 billion annually just from overdraft fees, so it's easy to lose a lot of money very quickly with the wrong account.
To make sure you don't lose your limited income to the bank that's supposed to be keeping it safe, research the best banks carefully to find a financial institution with limited or no fees.
3. Investment fees
Finally, investment fees are another huge cost that could destroy your retirement security. You could get hit with a number of them, especially if you have actively managed investments with high expense ratios or if you work with a financial advisor.
Recent research from Pew Charitable Trusts found that a small difference in mutual fund fees could leave retirees with tens of thousands of dollars less over time, which can be a huge problem for those who are worried about running short of money toward the end of their lives.
It's important to understand exactly what you're being charged both for any financial advice you're paying for and within the investments that you own. There are free online brokerage firms and low-cost exchange-traded funds (ETFs) you can invest in to keep your expenses down.
By watching out for these costs, you can preserve more of your retirement money and actually use your hard-earned funds to enjoy your later years.
