June 22, 2020

Edited 12/30/20

4 Ways to Spend Less in Retirement

How to spend less in retirement without sacrificing your way of life.

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If you’re finding it harder than you expected to stretch your income in retirement, you’re not alone. According to the Employee Benefit Research Institute, many retirees are finding that their food and healthcare costs are even higher in retirement compared to when  they were working. 

Your spending habits may also change from year to year as you grow older, making it tough to predict how much you need to withdraw from your portfolio. According to research from J.P. Morgan, for example, more than half of retired households see their spending bounce up and down throughout retirement: one month, you may find yourself spending much less than you normally do––perhaps because you stayed home more often or spent less on gifts. Another month, you may get hit with so many must-pay expenses that you’re having trouble making it to your next check. 

Rather than panic when your expenses spike or your savings dip along with the stock market, your best course-of-action is to come up with a plan for slimming your expenses for good. That way, you will have more room in your budget to comfortably handle unexpected bills. In addition, you will also be better equipped to put your money toward the things you really love to do, such as visiting family, planning a roadtrip or attending entertainment events.  

Here are four tips for curbing your everyday expenses:

1. Pull out your bank statements and audit your expenses

People often make the mistake of focusing on big expenses, such as housing, utilities and healthcare, when they’re coming up with a monthly budget. But they don’t take into account the smaller purchases that are slowly draining their accounts. To get a better sense of where you’re spending your money, scan your credit card or bank statements and look for patterns in the names and types of merchants that are appearing in your transactions.

You could be surprised by how much your routine as a new retiree is adding up. For example, do you like spending time at your local greasy spoon or coffee shop every week? If so, how much are those visits costing you? Gourmet coffee every day isn’t going to make a huge dent in your budget. But if you’re buying several rounds of coffee, along with muffins and other snacks, while you linger at a coffee shop for hours, then those visits are going to add up. 

Also, look for unnecessary purchases or monthly expenses that you can easily cut. For example, you may find that you have half a dozen subscription services billing your credit card each month, but you’re only using two or three of them. Or you may be spending more than you need on a fancy gym membership when there’s a nearby YMCA. There’s also digital fitness classes that you can stream like Yoga International offers a 30 days free trial or mirror.co is a mirror that streams fitness classes. Mirror can be installed on your wall so you can follow along while watching yourself to make sure you’re doing it right.

Tip: It can be tedious to scan a paper bill or squint at an online bank statement. As a result, you may have trouble motivating yourself to actually do it. Instead, try linking your credit and debit cards to an app that sorts your expenses for you and displays them in colorful graphs. That way, you’re more likely to stick with it.

2. Use time to your advantage 

One of the great things about retirement is that you have all this extra time now that you can use any way you wish. That’s a huge advantage when you’re trying to save money. There are tons of resources available for cutting the cost of everyday purchases––from online promotions to cash back apps, such as Silvur. But people who are working often don’t have the time or bandwidth to take advantage of them. 

Now that you’re free to set your own schedule, take some time to research promotions. Download rewards app. Link your bank accounts to get cash back. Compare rates on insurance, utilities, cable plans and other monthly expenses. Retailers and other companies are often so eager for your business, they are willing to share deep discounts and freebies just to get you in the door. 

Tip: Before making your purchase, see if that retailer is part of Silvur’s marketplace partners. Silvur will link the cash back reward directly to your savings account or provide you with a discount code exclusive to Silvur members. Using Silvur daily can save you time and money.

Other options including taking advantage of price matching or your credit card’s price protection policy can be a little more time extensive and less convenient. If you see a lower price on an ad, take it to your local retailer and ask if they’d be willing to give you a better price. Or, if your card offers price protection, file a claim with your card issuer if an item you purchased has dropped in price. 

3. Consider swapping out your credit cards

If you’ve used the same credit card for years and have mostly ignored it, now may be a good time to start getting more familiar with rewards cards. Many rewards cards offer a surprising amount of value to people who use their cards regularly for everyday expenses. Some fancier travel cards, for example, offer bonuses that are big enough to buy two free airline tickets, as well as free travel credits and other luxurious benefits. Meanwhile, many no-annual-fee cards offer sign-up bonuses worth up to $200 or more. 

Tip: If you don’t want to spend much time fiddling with a complicated rewards program, look for a no-annual-fee cash back card that offers at least 1.5% to 2% cash back. If you regularly spend $1,000 a month on your credit card for groceries, dining and other expenses, you could wind up with $180 to $240 in cash back after just one year.

4. Breakaway from the pack

Often when people picture retirement living, they see themselves sunning on a beach in Florida or teeing up in sunny Arizona. But many of the most popular retirement destinations are notoriously expensive. Rather than follow the crowd, consider destinations with a high quality of life paired with lower living costs. Instead of paying for hotels, airline tickets, and hiring a cab, rent an RV (get 25% off RVShare) and use Roadtrippers Plus (save $5 off with code: BTR5QTP) to plan your stops along the way to get to your end destination. You’ll save money on accommodations and possibly meals where you can cook or grill in a campground.

If you’re a birding enthusiast, for example, you may enjoy spending your winters in South Texas where the cost of living is relatively low. Or, if you’ve always wanted to hike through the Pacific Coast, you may be able to find lower-cost towns that are only a few hours away from more popular city centers. 

Tip: You can also save money on travel by looking for hidden gem destinations that are loved by savvy tourists, but aren’t yet widely hyped. Ask friends for word-of-mouth recommendations or look up guides geared specifically for travelers who are looking for roads less traveled.

Bottom line: Spending less in your retirement doesn’t have to be painful. There are a number of steps you can take to cut your expenses and continue to live well throughout a long retirement.