How to Save Money in Retirement
Reaping Extra Income From a Home, Car, and Other Sources
Oct 21, 2009
A retiree's house probably has the greatest potential for freeing up money that can significantly boost discretionary income. However, there are also some other good options for living more cheaply. Here are some tactics to consider.
Cutting Home, Utility, and Car Expenses
Moving to a cheaper part of the country could save thousands. However, this option is pretty contingent on housing market conditions and could also be a personally wrenching situation. But the bottom line is, anyone living in a very high-cost area could buy a house for about half the price of the one he or she would be selling. Everyday living expenses would also be a whole lot less. There are websites that offer descriptions and costs for areas of the country that are ideal for retirees such as BestPlaces.net and RetirementLiving.com.
Lesser, but still lucrative options, are to buy a smaller home in the same locality or get a reverse mortgage. While a reverse mortgage usually means there will not be a paid-off house as a legacy, it could prevent your children from having to support you, and at the same time provide a much higher income. AARP warns that there are pitfalls to a reverse mortgage, so it pays to deal with an established, reputable lender and read the fine print.
Phone service should be reviewed to be sure there are no features that are not used or needed. Shopping around for the best deals among the various providers can be an eye opener. Bundled services, which combine Internet access with home or cell phone service, can yield significant savings. If long distance calls are infrequent, a telephone card might be a good move. Then only cheap, basic service will be needed from a provider.
Are two cars still really needed? If calculations show that having just one reaps big savings, it might be much better to rent a car or take a taxi when another car is needed. Other alternatives are keeping cars forever or buying smaller, more efficient ones, preferably used. Even a one-year-old used car saves thousands in depreciation, and avoids the much higher car registration and license fees slapped on a new car.
Insuring the car and the house with the same firm can save up to 15% in combined costs. Another plus with this strategy is if an accident occurs, there is less likelihood of being dropped, since the insurer wants to keep all your business. Getting out of the fast lane also saves. Driving 55 mph instead of 65 mph burns 15% less gas.
Potential Income Tax Savings
Keeping up with tax law changes is an overlooked strategy for many. The laws change every year and some deductions and credits that may only be in effect for a year or two could save hundreds. Checking the annual tax publications at your bookstore for their lists of commonly overlooked deductions should be added to the to-do list. Many retirees are not aware there is an unbelievably long list of medical deductions- such as modifications to a home for the disabled, dental costs and insurance, mileage for doctor visits, hearing aids, acupuncture, new glasses, and contact lenses. A tax preparer will not always ask you questions pertaining to recent tax changes. Be your own best advocate.
Reducing Travel and Lifestyle Costs
It is worth checking out Elderhostel, which offers educational adventure trips at great prices for the over-55 set. Flying smarter is easier these days with the newer websites that not only search for cheap airfares but forecast whether or not the costs of the routes frequented by you and yours are headed up or down (e.g., airfarewatchdog.com). One site actually uses people (gasp!) to find low fares that computers miss.
Getting in shape can be accomplished on the cheap by enrolling in a low-cost community college class and using your student ID card to work out in the college gym. Signing up with DVD on-line movie services like Blockbuster or Netflix that mail out their DVDs, allows subscribers to enjoy as many movies as desired each month at a very low flat rate.
With some investigation and analysis, savings are to be had that could result in an easier retirement and more peace of mind.
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