The second half of your financial life often presents opportunities to reduce living costs without sacrificing your quality of life. Children may be grown and educated, insurance needs change, and loans, such as a home mortgage, may be fully repaid or close to reaching their final payment. In addition, you are usually well beyond the stage of life that requires a lot of purchases to set up a household. Looking for ideas to cut your spending to help save for retirement or to live inexpensively after retirement? Consider the following menu of suggestions:
- Trade down to a less expensive home/farm in the area where you currently live or move from a high cost-of-living state (e.g., New Jersey) to a lower cost one.
- Cash out or discontinue unnecessary insurance policies (e.g., whole life insurance and disability insurance if no longer working). Save the money or use it to pay premiums for Medigap and long-term care insurance policies.
- Sell the second family car, and save on insurance and maintenance costs.
- Use "senior discounts" for travel, shopping, restaurants, and at parks, movies, museums, and other forms of entertainment.
- Plan trips around weekend or mid-week specials, and be flexible about travel dates, airlines, and airports that you fly into or out of. Try to do the reverse of what other travelers do to save money.
- Travel with the Elder Hostel program, planned tours, or all-inclusive travel "packages."
- Buy grocery items on sale and/or in season, and select generic or store brands, which are generally cheaper than national brands (exception: when national brands have deep discounts or coupons).
- Drive a car that costs less than average to insure, and ask for discounts, including "safe driver" rates and a premium reduction for short commutes. Raise your deductibles if the savings is worth it.
- Buy a "new used" car. Check Consumer Reports' April issue for recommended makes and models.
- Retire to a state with no state income tax and/or a state that does not tax Social Security and/or income from a pension (if applicable; e.g., a pension from off-farm employment).
- Take all income tax breaks available to taxpayers age 65 and older (e.g., higher standard deduction).
- Reduce income taxes by drawing down taxable accounts before tax-deferred accounts prior to age 70½.
- Fund a tax-deferred SEP or IRA account with pre- or post-retirement income to lower income taxes.
- Reduce the risk of incurring costly medical expenses by getting an annual flu shot and physical exam, taking required medications, eating nutritious meals and snacks, and exercising regularly.
- Request generic equivalents of prescription drugs, where available, and order drugs by mail.
- Use restaurant discount coupons and "early bird specials," take a "doggie bag" of food home for another meal, and/or eat out at lunch instead of dinner.
- Buy energy efficient appliances and run dishwashers/washing machines with full loads at off-peak hours.
- Save energy by closing off unused rooms, checking weather stripping and caulking, and upgrading attic insulation. Get a free energy audit that will provide a list of recommended steps and projected savings.
- Choose a wireless (cell phone) plan that best meets your needs (e.g., amount of data, rollover data, etc.) or purchase low-cost prepaid telephone calling cards as needed.
- Purchase "bundled" telecommunications service if it results in cost savings; e.g., television, internet, and phone service combined.