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How I Save Money by Living Simply in Retirement | Retirement
Embracing a simple lifestyle in retirement can help you relax, appreciate what you have and save money over the long term.
Janet Ruth Heller and her husband, Michael, both former college professors in Portage, Michigan, accomplish this by staying active but keeping a close eye on spending. “Both of us earn some income each year from part-time work,” Heller said in an email. “However, we rely on our savings and some investments for most expenditures. We do not want to live extravagantly.”
If you’re also looking to save money by living simply in retirement, here are some ideas from Heller and financial experts :
- Create an income plan.
- Track each dollar.
- Keep living expenses low.
- Get involved in groups.
- Avoid impulse spending.
- Choose activities thoughtfully.
Create an Income Plan
As you consider your monthly income needs, you’ll want to know how much you’ll receive from Social Security once you begin claiming benefits. Those who apply for Social Security at their full retirement age, which is 66 or 67 for many, will receive their full benefit. You can take benefits as early as age 62 if you’re eligible, but you’ll receive a reduced amount. If you wait until after your full retirement age to apply, your benefit will increase by 8% every year until age 70.
The decision to tap Social Security early, at your full retirement age or later will depend on many factors. One advantage of receiving benefits early could be that you set up a simple lifestyle and use the funds to support it. Those who need more income each month should consider other ways to access funds, such as taking distributions from retirement accounts.
“If delaying Social Security, consider alternatives to generate income in the interim, such as a period certain annuity, a bond ladder or a CD (certificates of deposit) ladder,” said Brock Westbrook, a certified financial planner and manager of Advanced Markets at Country Financial in Bloomington, Illinois, in an email. Period certain annuities pay out guaranteed income for an established time period. A bond ladder is a portfolio of bonds that mature on different dates; the same is true for a CD ladder.
You could also bring in more income with a seasonal or part-time job. “I tutor a student, and my husband works for the Connecting Chords Music Festival,” Heller said.
Track Each Dollar
Monitoring the funds that flow in and out of your accounts will help you make better decisions. “Look at your expenses to determine which expenses must be covered and which expenses can be flexible depending on market conditions,” Westbrook said. “Log every expense for a month or two and then highlight all nonessential expenses.”
As you look over that list of extras, decide which ones you could cut to save money. You might choose to keep several subscriptions and cancel the rest, for example, or handle home repairs on your own.
“My husband checks our credit card statements online and in print frequently to make sure that we are not spending excessive amounts of money,” Heller said.
Find Hobbies at Home
Look for ways to stay active and engaged at home. “My husband and I enjoy birdwatching now that we are retired,” Heller said, adding that much of it occurs in their backyard. The couple also maintains a garden, which enables them to save on food costs. “We have two apple trees that produce enough fruit that we do not have to purchase apples from August to December,” Heller said. “We also have plenty of fruit to give to friends.” In addition, the couple grows beans, tomatoes, peppers, lettuce, zucchini, asparagus, raspberries, rhubarb and many herbs.
Also, consider scheduling creative time at home. “I have done a lot of writing since I retired,” Heller said. “I have more time to create new work and to revise older essays, poems, stories, dramas, creative nonfiction and literary criticism.”
Keep Living Expenses Low
The size of your home and the area where you live can make a significant difference in how much you spend each month in retirement. “Consider moving to a smaller home, downsizing your current living space or even moving to a new city or state,” said Jonathan De Fex, a financial advisor with Northwestern Mutual in Rockwall, Texas, in an email. “All of these can help reduce housing costs, property taxes and maintenance expenses.”
Consider how you can lower other expenses. Heller and her husband do not eat out frequently, they maintain their appliances to avoid breakdowns, and they keep their cars for a long time. “I now drive a 2015 Honda Accord,” Heller said. “I drove my previous Honda Accord for 14 years before I replaced it.”
Get Involved in Groups
Staying active and socializing doesn’t have to cost a lot.
“Most nonprofit organizations have low fees for membership and some have no fees at all,” said Heller, who is involved with the Ladies’ Library Association of Kalamazoo, which charges $60 for an annual membership. “It sponsors many activities for members all year, including speakers, musical performances and luncheons,” she added.
Her husband participates in music groups that charge no fees, and he’s also involved with the Kalamazoo Bicycle Club, which costs $35 per year for one adult and $45 for a family, Heller said. “Volunteering for nonprofit organizations keeps us busy and enables us to meet new people,” she added.
Avoid Impulse Spending
A shopping spree or a last-minute cruise might seem fun, but they can have a big impact on your available funds. If an item that you want to buy isn’t in your monthly budget, it may be wise to think it over first. “Before making any nonessential purchases, give yourself some time to consider if it’s something you truly need or if it’s just a fleeting desire,” De Fex said.
Before making a big purchase, Heller and her husband consult each other. “When he needed to buy a new viola, I went with him to a special shop in Grand Rapids, where I listened while he played different instruments,” Heller said. “It was clear to both of us that the viola he chose had a much more beautiful sound than his old viola and was definitely worth the one-time expense.”
Choose Activities Thoughtfully
It may seem like there are endless ways to spend your retirement, but choosing a few key activities can help you keep costs under control.
“Monitoring our expenses enables us to give more money to our favorite charities and to give gifts to family members and friends,” Heller said. “We also have funds available for special vacations and other treats.”
