’Tis the season for frights. So let’s touch on a terrifying topic: running out of money in retirement, yikes!
Going broke in your golden years is commonplace, lasts a long time and is a scarier nightmare than any Halloween horror film you are watching this week. But by changing habits and smart planning, you can avoid that terror.
Here are some suggestions:
1. Cheaper housing:
Personal finance pundits often hype small savings tricks, like skipping daily light-whip two-pump Mochaccinos and quitting avocado toast. Those could add up. But cutting big, unnecessary expenses is a better place to start.
For many, the best savings trick is leaving the big city, which are expensive. Housing, restaurants, groceries and basic services typically get cheaper the further you move away from the metropolitan center. Depending where you live, as you move further away from the city center to the suburban area, you can cut housing costs by almost half.
If you can’t give up urban living, perhaps you should consider moving to a cheaper metro area or live in a smaller house or apartment.
2. Cut entertainment spending:
If you don’t want to leave family, friends or community, there is another big, easy way to save: Slash entertainment spending. Few folks fully fathom what they fritter away on entertainment. The Employee Benefit Research Institute estimates people aged 65 to 74 spend $5,832 annually on play. That’s $11k per couple. One reason it gets out of hand? In retirement, you jump from one or two leisure days a week to seven – more opportunities to spend.
But there is a lot of free and cheap alternatives to have fun like reading a book, taking a walk at the park or experiment your way through a new cookbook instead of dining out regularly. Take a cue from millennials and try cord-cutting your way to cheaper TV with streaming services instead of cable. Netflix or Amazon Prime can make movie night cheaper, too. Make sure you actually use services you subscribe to. Many subscribe to things (streaming, gyms, wholesale retailers, etc.) they rarely use. It’s a waste.
3. Rethink your old budget:
Central to all this is: Plan to change your habits, which can become our real Halloween goblins. Being habitual critters, our routines keep us spending the way we did before.
Just as important as avoiding old routines is setting a budget. Then stick to it. Tally your spending. Hold yourself accountable. Don’t forget to plan for the unexpected!
Many folks forget to factor in wiggle room for car or home maintenance. Setting aside a few thousand a year for potential big-ticket hiccups can save you from yanking emergency cash from your retirement fund.
Budgeting and penny-pinching may not sound fun. But it beats the terrifying misery of going broke in old age. A little pre-planning goes a long way later.
Source: USA Today