You -- and many other people -- may have been absolutely focused on building enough savings to provide a comfortable income in retirement.
But often overlooked are strategies to make retirement life more affordable.
The less money you need to live on, the less income you’ll need, and the less retirement savings that’ll be necessary.
Finding ways to make retirement life more affordable is even more important for those who don’t have pensions and large retirement plans.
Below are nine strategies to help make that affordability happen in your retirement life.
1. Move to a Less Expensive Location
Making a geographic move is one of the best ways to reduce your overall cost of living.
For example, New York City has a cost of living index of 100, while Raleigh, North Carolina is at 70. Put another way, you can reduce your total living expenses by roughly 30% if you live in New York City, and move to Raleigh.
2. Downsize Your Home
Since housing is one of the biggest single expenses you’ll have in retirement, you’ll get more bang for the buck cutting this cost than most others.
The most obvious solution:
Move from a larger home to a smaller one. It will usually mean lower property taxes, insurance, utilities, and repairs and maintenance.
Geography also plays a major role.
The median sales price for a house in California is $544,000, while it’s just $285,000 next door in Arizona. If you live in California, and still have a mortgage on your home, you may be able to sell and pay it off, then pay cash for a comparable property in Arizona.
Property taxes are at least as important. You’ll owe them even if you pay off your mortgage. They vary widely from state to state.
For example, at the high end, New Jersey has an average property tax bill of $7,840, while South Carolina averages just $851. You can save nearly $7,000 per year by relocating.
3. Reduce Taxes
One of the best ways to do this is through a Roth IRA conversion.
That’s where you convert tax-deferred retirement funds, that will become taxable upon withdrawal, to a Roth IRA.
You’ll have to pay tax on the amounts converted, but once you reach 59 ½ and have been in a plan for five years, withdrawals taken from a Roth IRA are tax-free.
It’ll usually take several years to complete a major conversion, so you’ll want to start now.
But once completed, you’ll have a source of completely tax-free retirement income to minimize your overall tax liability.
Time your withdrawals from tax-deferred accounts based on your income.
For example, if you have a high income in a retirement year where you have significant income, take smaller withdrawals.
In years where your income will be lower overall, you can take larger withdrawals.
4. Minimize Healthcare Costs
It’s likely the biggest healthcare related expense you’ll have in retirement will be health insurance premiums.
For most retirees, at least those 65 and older, it’s comprised of Medicare and a Medicare supplement. It’s generally good coverage, but you’ll still have copayments and deductibles. The best way to minimize those out-of-pocket costs is to maintain good health.
And with more time on your hands from retirement, it should be easier to do than ever.
Eat a healthy diet, get regular exercise, and see your doctor regularly to head off any potential illnesses or ailments early.
Another strategy is to take advantage of the self-employed health insurance deduction.
If you have even a part-time business in retirement, or plan to, you can deduct up to 100% of the cost of health insurance premiums against your business income.
5. Take Advantage of Senior Discounts
Many merchants have senior citizen discounts.
Once you retire, it’s well worth the investment of your time to investigate where they’re available. But you won’t have to look too far.
Senior discounts are available in restaurants, movie theaters, entertainment events, and even some hotels and theme parks.
The biggest issue will be complying with the requirements of each merchant.
For example, it’s very typical for restaurants to offer senior discounts if you dine before a certain time, like 5:00 pm. Movie theaters typically offer discounts at any time, but you may get bigger discounts for matinees.
Since you’ll be retired, you’ll have time to go to these venues during the day. If you’re planning a hotel stay, always ask about senior discounts.
6. Save Big on Major Travel Plans
Since travel is a major part of the retirement experience, it’s also a big category where you can make retirement life more affordable.
One of the best ways to do this is by traveling during off-peak seasons.
For example, July and August are the peak travel months in Europe, when the crowds will be biggest and prices are higher. But you can save substantial money by going off season.
This is true just about anywhere you want to travel to.
For example, since so many people travel to the Caribbean during the winter months, you can often get discounted deals by going in the summer.
The same is true of local beach resorts, and being retired you’ll have a big advantage with your schedule. Rather than vacationing at the beach during June July and August, instead plan your trips for May or September.
After Labor Day, the big crowds and high prices are gone, but the water is usually warmer than any other time of the year.
Another strategy is to book your trip well in advance.
Not only will that give you more time to plan more cost-effective trips, but some resorts and travel agencies will give you a discount for booking months ahead of time.
7. Minimize Fees on Investments, Advisory Services and Financial Planning
There’s not a whole lot that can be done to lower the cost of certain services, like estate planning.
As the saying goes "you get what you pay for," so don’t look for the cheapest option in town.
But generally speaking, you’ll be better served by paying a flat fee than hourly. That will limit the cost, particularly if it’s a type of service that will primarily be a one-time event. But you can save a lot of money with investments and advisory services.
This is particularly true when it comes to investment management.
Traditional investment managers typically charge a fee of between 1% and 2% of the value of your portfolio. But you can reduce these fees substantially by using a robo-advisor service.
They provide much the same investment service as traditional investment managers, including portfolio creation and ongoing management.
But robo-advisors like Betterment and Wealthfront will manage your portfolio at an annual fee of just 0.25%. That means just $250 on a $100,000 portfolio, $500 on a $200,000 portfolio, or $1,250 for managing $500,000.
That will not only save you substantial money on investment fees, but it will also improve your net annual return on investment.
8. Lower Your Transportation Costs
Transportation – mostly owning one or more cars – is another of the biggest expenses you’ll have in retirement.
AAA reports the average cost to own the average car at $8,849 when driven 15,000 miles per year . If you have or plan to own two vehicles in retirement, that number will double, to nearly $18,000 per year.
The obvious solution, in this case, is to plan to own just one vehicle in retirement.
If both you and your spouse are retired, the times when you will be heading in different directions on the same day will probably be fairly rare.
In those situations, you might take advantage of ridesharing services, like Uber and Lyft.
But the type of vehicle you own also makes a big difference.
Once again, according to AAA, the average annual cost to operate a medium SUV is higher than the cost to operate a small sedan. You can save nearly $3,000 per year by going with a small sedan.
9. Get Out of Debt
Rising debt is affecting most Americans, even retirees. But paying it off before you retire is one of the best ways to make retirement more affordable.
For example, if you have a $20,000 car loan with a $400 monthly payment, and $10,000 in credit card debt, with a $200 monthly payment, you can reduce your monthly cost of living by $600 by paying off those two debts.
That’s a big reduction in living expenses for a relatively small investment.
10. Spend Time (Not Money) on Family
Even in retirement, you might feel obligated to help your family financially.
It may gifts for your adult children or your grandchildren. Or, a relative is in a tough financial situation asking for money.
Be sure to prepare for these kinds of tough decisions and conversations.
Do not disrupt your retirement funds for the sake of others who have more time and/or ability to recover financially on their own.
Rather, spend more time to help loved ones, such as offering to babysit occasionally.
Without a doubt, focusing your retirement plan efforts on building a large investment portfolio is the single best strategy to prepare.
But implementing ways to make retirement life more affordable is a close second.
The less money you need to live on, the less income you’ll require.
That can make an especially big difference if your retirement portfolio won’t be quite as big as you’d like it to be.
But just by implementing some of the strategies above, you can maintain a very comfortable retirement life with a lot less money.