Imagine having to live on the same exact paycheck for the rest of your life, with no chance that it will ever go up. Doesn't exactly sound like a cushy lifestyle, does it?
Like it or not, however, that's the reality many retirees face.
With so many Americans leaving the workforce woefully unprepared to live on a fixed income, it's no wonder money is a major source of stress for retirees. The average American will spend a good 20 years in retirement, but many don't save enough in advance to cover their expenses in full. In fact, an estimated 31% of non-retirees reportedly have no retirement savings whatsoever. Considering that couples retiring at age 65 today can expect to spend almost a quarter of a million dollars in healthcare costs alone throughout retirement, it's important for those who are no longer working to make every last dollar count.
Here are five ways to get started.
1. Downsize your living space
Sure, it's nice to have a larger place when the kids and grandchildren come to visit, but as a general rule, the more space you have, the more it'll cost to maintain. Heating a 3000-square-foot home, for example, is bound to cost considerably more than heating one half its size. You'll also pay for a larger space in other ways. If you own your home, more real estate means higher property taxes and homeowners' insurance premiums. And if you're still paying off your home, downsizing could save you hundreds of dollars per month in mortgage payments.
2. Rent, don't own
If you own a home that's costly to maintain, selling it and renting instead could save you thousands of dollars each year. When you own property, you're responsible for every little expense, from plumbing to lawn maintenance and snow removal. As you get older, your ability to tackle these jobs on your own may be limited, which means you'll need to hire outside help and pay a premium for it.
Renting, by contrast, means paying a set amount each month and leaving your landlord responsible for the rest. Plus, as a renter, you won't be responsible for real estate taxes, which could save you a small fortune right off the bat.
Granted, if you've paid off your mortgage and you don't pay a king's ransom in property taxes and maintenance, then it probably makes sense to stay in your home. Similarly, if you own a condo or townhome with low HOA fees that cover the bulk of your maintenance, you may be better off keeping it, especially if you no longer owe money on your mortgage. But if you're making a monthly mortgage payment and spending thousands of dollars each year on taxes and maintenance, then renting could lower your overall monthly spend.
3. Give up your vehicle
Between car payments, auto insurance, and oil changes, owning a vehicle is an expensive prospect, even when things don't go wrong. According to AAA, the average cost to own and operate a sedan was $8,698 in 2014, while the average annual insurance costs for sedans rose 9% from the previous year to $1,115. And keep in mind that car insurance rates tend to go up for drivers who are 70 and older.
If you live in a city with taxis and public transportation and no longer need a vehicle to drive to work, then you may want to give yours up. While you may wind up falling back on taxis or car services, there's a good chance you'll save money by using them sparingly. Say you end up spending $50 a week, or $200 a month, for someone else to shuttle you around town as needed. The average car owner, even assuming they've paid off their vehicle, could easily spend that amount on car insurance and maintenance, to say nothing of fuel costs. They also have to worry about sudden major repairs, which can wreak havoc on any retiree's budget.
4. Take advantage of senior citizen discounts
You know those early bird specials you used to laugh at? Now's your chance to eat like a king at a fraction of the price. From movies to museums to bus fares, there are a host of discounts available for the 65-and-older set. For example, pharmacies like Rite Aid and CVS offer seniors discounts on prescriptions, and many national restaurant chains, such as Denny's and Applebee's, offer discounts for seniors as well. Do some research to find out what benefits are available in your area and consider joining a group like AARP for additional perks, such as savings on hotels, airfare, and rental cars. Even if you manage to cut your budget by just $10 a week, that's over $500 a year you can use for something else.
5. Shower your grandkids with love, not money
If you're on a budget, you have to fight the natural urge to give those little bundles of joy everything under the sun. There's no reason to feel guilty because you can't buy your grandkids all the latest toys or help them pay their college tuition. Though you may feel like it's up to you to give your grandkids the best of everything life has to offer, their parents are the ones who have many working years ahead of them to earn and save money. Let them be the ones to cough up the dough for summer camp, college, and the like.
Staying financially afloat in retirement is all about prioritizing and making smart decisions. And remember, at a time in your life where money is limited, even a small amount of saving can go a long way.