Reduce your monthly expenses in retirement (starting today)Finances
When it comes to retirement, it's all about living on less. And that's not necessarily a bad thing: A recent survey conducted by Athene showed that most retirees are happier than they were during their working years, despite living on smaller budgets. Here are four financial savings steps you can take now that may help make living on less much easier once you're retired.
- Pay off your mortgage. Chances are that your monthly mortgage payment takes up a big part of your budget. For obvious reasons, paying off your mortgage frees up more money for your monthly savings and minimizes the risk of falling on bad financial times and losing your home. But there is another less obvious reason for not having a mortgage to worry about after you retire, explains Casey Fleming, a mortgage adviser in San Jose, Calif., and author of The Loan Guide: How to Get the Best Possible Mortgage. A reverse mortgage, which allows you to tap into the equity in your home for cash, provides a cushion that can help with unexpected expenses that pop up in retirement, like medical bills.
- Downsize your home. Another reason to have your mortgage paid off? So you can downsize your home and bank the remaining cash after you sell. If buying a smaller house or condo doesn't make sense for your situation, there is always renting, which could end up being cheaper in the long run.
- Move to a less expensive location. Fleming, who is based in Silicon Valley, sees this strategy with many of his clients. They move to a state with no income tax, lower property taxes, or other tax benefits that high-cost states like California and New York do not offer. "Washington has no income tax and Oregon has no sales tax,"says Fleming, "so many Californians opt to buy a retirement home in Vancouver, Wash., and then do all of their shopping in Portland, Ore."
- Adopt money-saving buying strategies. Clearly you'll want to shop less in retirement to make your money go further, but you can get a jump-start on those savings now. Your new rule of thumb? Always look for a less expensive alternative before making a purchase. For example, wait for a big sale before buying a new appliance. Bonus points if you put a little extra cash in your pockets by selling items you no longer want or need online or through consignment.
The information regarding a reverse mortgage is based on our understanding of current tax law. There are costs and benefits to obtaining a reverse mortgage. We recommend that you seek professional legal advice for applicability to your personal situation prior to entering into a reverse mortgage transaction.