It used to be that the golden years were a little moregolden. In addition to social security benefits, you’d retire with a pension,and you could live off the interest earned on retirement savings. Add a lowercost of living and higher home equity to the equation, and living the good lifewas easy. Nowadays, retiring mostly means living on a fixed income.
What does this mean if you’re approaching retirement oralready living on a fixed income? The good news is that the frugal can and dorule retirement. While the years may not be as golden as you’d like, they canbe lined with silver, if you keep these tips in mind.
Live below your means
This maxim has never been more important than right now. Ifyou’ve been saving up for retirement since your college years and can afford toparty it up in the Caribbean well through retirement, more power to you. Ifnot, get real. Living on 20-25 % less than your income enables you to savemoney for the unexpected, be it a medical problem that requires out-of-pocketexpenses or a present for a surprise birthday party. One idea for if you livein a city or a place with public transportation, live the car-free life.
Micromanage your budget
Living below your means on a fixed income leaves very littlewiggle room when it comes to budgeting. Prioritize your expenses, starting withset costs such as insurance, healthcare, rent or mortgage, and utilities. Thenadd the average amount you spend on discretionary expenses each month, such asentertainment, food, and gas. If your total expenses aren’t 20-25% below yourmonthly income, cut from your discretionary costs until you have enough moneyearmarked for savings.
Avoid adding new debt
Now is not the time to add more expenses and debt. If you’vehad trouble in the past with bad financial decisions and impulse buying, steerclear of triggers that might lead to overspending. A shiny new purchase mayseem like a good idea at the time, but busting your budget can have a lastingimpact that is likely to lower your standard of living substantially. Practicecontrolled splurging instead. Occasionally earmark some of your discretionaryincome and go shopping.
Consider moving for tax savings
Because your income is most likely lower than it was beforeretirement, you should pay less in taxes. If you’re looking for additional taxsavings, it’s good to know that some states are more retirement friendly thanothers when it comes to social security benefits and income and sales taxes.There are currently nine states that don’t charge income tax, another 37 thatdon’t tax Social Security benefits, and there are four states—Alaska, NewHampshire, Oregon, and Montana—that impose no sales tax.
Downsize to a smaller place
If you’re still living in the family home, now may be theright time to sell and move into a smaller, less expensive place. Doing sooften gives you money to invest and save, and a smaller home will cost less torun. By selling, you may also lower your property taxes or have to pay none at all,if you choose to rent.
Have fun for free
It’s ironic that when you finally have time to pursuehobbies and interests, your income is limited. It is possible, though, to enjoyyourself by spending little to no money at all. If you’re eligible, take advantageof senior specials, and check local publications and websites for free events.Museums, zoos, and botanical gardens often have complimentary admission daysjust for you.
Also, consider volunteering. Many organizations will rewardyou with free passes to events when you donate your time. And take advantage ofonline communities like meet-up that unite people with similar interests.
Earn extra money on the side
We know, retirement is a time to not do anything but relaxand live well. “I don’t have to, I don’t want to, you can’t make me,” is agreat attitude if you can afford it, but not so much if you’re really pinchingpennies. Retirement is a new stage in life, so treat your career that way tooby picking up a few side hustles now and then for extra income.
Living on a fixed income does take some adjustment, but withsome creative budgeting, you can enjoy a satisfying retirement.
By David Lasman – “Ask Medicare Dave” | President – SeniorHealthcare Team
wwww.SeniorHealthcareTeam.com | 866-333-7340
Selecting the right healthcare plan through Medicare can beoverwhelming and downright stressful. Senior Healthcare Team is a nationwideresource that provides guidance and support about Medicare to seniors at nocost to them and helps them to choose the most suitable insurance plan tailoredto their specific needs and budget. Ourgoal is to educate and empower our clients to make the best decisions regardingtheir healthcare and clear up the confusion of Medicare. At Senior Healthcare Team, we aren’t partialto any one insurance company. Ourloyalty is to our clients and our mission is to provide them with the besthealthcare options at the very lowest cost.
FAQs
“With a nest egg of $100,000, that would only cover two years of expenses without considering any additional income sources like Social Security,” Ross explained. “So, while it's not impossible, it would likely require a very frugal lifestyle and additional income streams to be comfortable.”
How to retire at 62 with no money? ›
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit. You get less than your full benefit if you file before your full retirement age.
Can I retire at 62 with $100,000? ›
Bottom Line. With $100,000 you should budget for a retirement income of around $5,000 to $8,000 on top of Social Security, depending on how you have invested your money. Much more than this will likely cause you to run out of money within 25 – 30 years, which is potentially within the lifespan of the average retiree.
How much income will $100,000 pay you in retirement? ›
After analyzing many scenarios, we found that 75% is a good starting point to consider for your income replacement rate. This means that if you make $100,000 shortly before retirement, you can start to plan using the ballpark expectation that you'll need about $75,000 a year to live on in retirement.
Can a retiree live on $3000 a month? ›
That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.
How much money does the average 70 year old have? ›
The average net worth of Americans aged 65 to 74 hovers around $1.2 million. The median net worth is lower, at $164,000. The typical 70-year-old has around $105,000 in debt, including mortgages, home equity loans, credit cards and student loans, as measured by the Fed's data.
Is $1500 a month enough to retire on? ›
While $1,500 might not be enough for non-housing retirement expenses for many people, it doesn't mean it's impossible to stick to this or other amounts, such as if you're already retired and don't have the ability to increase your budget.
What happens to retired people with no money? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
What happens when you retire with no savings? ›
If you're an average earner, Social Security will only replace about 40% of your former income. So if you retire without any savings, you might end up effectively taking a 60% pay cut. At the start of 2023, the average Social Security benefit was $1,827 a month. That's an annual income of a little less than $22,000.
How many Americans have $100,000 in savings? ›
Most American households have at least $1,000 in checking or savings accounts. But only about 12% have more than $100,000 in checking and savings.
If you have substantial income from sources like a pension and Social Security, an $800,000 portfolio could last for many years. That's especially true if your expenses are low and you don't have significant health care expenses.
Can I retire at 62 with $400 000 in 401k? ›
With $400,000, if you buy an annuity at age 62 and then retire, you might expect monthly payments of around $2,400 for the rest of your life. This comes to about $28,800 per year in guaranteed income according to one estimate.
What is a good monthly retirement income? ›
Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
How long will $800,000 last in retirement? ›
With $800k initially saved, you could withdraw $40k-60k annually and still have your portfolio last between 19-28 years. The higher your spending amount, the faster your savings get depleted. Assessing your specific retirement costs and life expectancy is key to determining withdrawal rate.
How long will $200,000 last in retirement? ›
Assuming you'll live to be 85 and won't want to work after retiring, you can anticipate a need for 20 years of income. If you're able to retire with $200,000 at 65, that will equate to $10,000 a year, or approximately $833 a month.
What is a good monthly income for a retired couple? ›
Average Non-Social-Security Retirement Income Needs
The annual amount is $32,956.44. Adding a bit of wiggle room, $3,000 per month or $36,000 per year is a good monthly retirement income for a couple to start with.
How much money does a retired couple need to live comfortably? ›
It's recommended that most couples save at least seven to eight times their combined annual income to retire comfortably. This number may seem daunting until you remember that savings compound over time.
How much money does a retired couple need to live on? ›
Generally, financial experts suggest that couples should aim to replace at least 70-90% of their pre-retirement income during retirement.
How much does the average couple live on in retirement? ›
What is the average retired couple income? According to the Census Bureau, the average yearly income for retired couples aged 65 and older was $101,500 in 2020. The median income for those households was approximately $72,800.
