It used to be that the golden years were a little more golden. 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 lower cost of living and higher home equity to the equation, and living the good life was easy. Nowadays, retiring mostly means living on a fixed income.
What does this mean if you’re approaching retirement or already living on a fixed income? The good news is that the frugal can and do rule retirement. While the years may not be as golden as you’d like, they can be lined with silver, if you keep these tips in mind.
How can you live below your means on a fixed income?
To live below your means on a fixed income, aim to live on 20-25% less than your income. This enables you to save money for the unexpected, such as medical problems or surprise expenses. For example, if you live in a city with public transportation, consider living a car-free life to reduce expenses. This maxim has never been more important than right now, especially if you're not able to party it up in the Caribbean well through retirement.
How can you micromanage your budget on a fixed income?
To micromanage your budget on a fixed income, prioritize your expenses. Start with set costs like insurance, healthcare, rent or mortgage, and utilities. Then, add your average monthly discretionary expenses (entertainment, food, gas). If your total expenses aren’t 20-25% below your monthly income, cut from discretionary costs until you have enough earmarked for savings. Living below your means on a fixed income leaves very little wiggle room when it comes to budgeting.
How can you avoid adding new debt on a fixed income?
To avoid adding new debt on a fixed income, steer clear of triggers that might lead to overspending, especially if you've had past trouble with impulse buying. Now is not the time to add more expenses and debt, as busting your budget can substantially lower your standard of living. Instead, practice controlled splurging by occasionally earmarking some discretionary income for shopping.
How can moving help you achieve tax savings on a fixed income?
Because your income is most likely lower than it was before retirement, you should pay less in taxes. If you’re looking for additional tax savings, it’s good to know that some states are more retirement friendly than others 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 that don’t tax Social Security benefits, and there are four states—Alaska, New Hampshire, Oregon, and Montana—that impose no sales tax.
How can downsizing to a smaller place benefit you on a fixed income?
If you’re still living in the family home, now may be the right time to sell and move into a smaller, less expensive place. Doing so often gives you money to invest and save, and a smaller home will cost less to run. By selling, you may also lower your property taxes or have to pay none at all, if you choose to rent.
How can you have fun for free on a fixed income?
It’s ironic that when you finally have time to pursue hobbies and interests, your income is limited. It is possible, though, to enjoy yourself by spending little to no money at all. If you’re eligible, take advantage of senior specials, and check local publications and websites for free events. Museums, zoos, and botanical gardens often have complimentary admission days just for you.
Also, consider volunteering. Many organizations will reward you with free passes to events when you donate your time. And take advantage of online communities like meet-up that unite people with similar interests.
How can you earn extra money on the side during retirement?
To earn extra money on the side during retirement, consider picking up a few side hustles. While retirement is often seen as a time for relaxation, treating it as a new stage in your career can provide additional income, especially if you're pinching pennies. Living on a fixed income does take some adjustment, but with some creative budgeting and side income, you can enjoy a satisfying retirement.
Living on a fixed income does take some adjustment, but with some creative budgeting, you can enjoy a satisfying retirement.
By David Lasman – “Ask Medicare Dave” | President – Senior Healthcare Team
wwww.SeniorHealthcareTeam.com | 866-333-7340
Selecting the right healthcare plan through Medicare can be overwhelming and downright stressful. Senior Healthcare Team is a nationwide resource that provides guidance and support about Medicare to seniors at no cost to them and helps them to choose the most suitable insurance plan tailored to their specific needs and budget. Our goal is to educate and empower our clients to make the best decisions regarding their healthcare and clear up the confusion of Medicare. At Senior Healthcare Team, we aren’t partial to any one insurance company. Our loyalty is to our clients and our mission is to provide them with the best healthcare options at the very lowest cost.