How to Adjust to Lower Income in Retirement

Typically, when you retire at age 65, and paychecks no longer come in, you must depend on pension, investments and Social Security to provide an adequate lifestyle. You must face the reality that retirement income averages about 50 percent of what you had been paid, and it requires some sensible adjustments.

When faced with the reality of less money, you need to find ways to cut spending accordingly. However, by frugal living and reducing expenses, it can be possible to continue a fully satisfying lifestyle. Some tips may help new retirees cope with getting more out of less.

1. Family conference: The first adjustment is to bring your family into the retirement plans. Several months before your last day of work, call them together for input on how to cut back on expenses. Ask for ways they can help in your plans. 

2. Home: The most important decision to make is whether you’ll stay in your current home or move to somewhere smaller and cheaper. Before you decide to sell, consult with a local realtor and consider how much your home is worth in the current real estate market. Any cash equity you can get from the sale, when banked or invested, can positively affect how much money you’ll have to spend after retirement.

3. Leaving: If you’re going to sell, spruce it up and put your home on the market as soon as possible. Meanwhile, check out potential places where you may want to live after the sale. The most important decision for many retired couples where winter is an annual factor, is to decide between an apartment near family or one in a faraway warm-weather area. 

4. Rent: When choosing a smaller, cheaper house or apartment for retirement living, compute what you can pay. The general rule is that utilities and rent costs (or new mortgage) shouldn’t exceed 25 percent of your monthly  retirement income.

5. Get help: Check with local government agencies that provide services for seniors, both in your current home town and where you intend to move. You may be eligible for financial help to pay rent and other expenses. Additionally, always check out special discounts for seniors in transportation, restaurants, stores, travel, entertainment and other activities.
6. Groceries: To budget your retirement living on lower income, set limits for food to cost no more than 25 percent of your monthly income. Cut back on unnecessary purchases, such as desserts, cakes, cookies and fatty meats. Just by eating moderate amounts of healthy, low-calorie foods, your costs will be much less and your belt a bit tighter.

7. Clip coupons: Another way to save on your limited budget is to use store discount coupons from the internet and newspapers. If you have a freezer, buy fresh poultry, seafood and meat in bulk. That will allow you to freeze and store individual servings at much lower costs.

8. Drop those bad habits: If you’re a typical 10-a-day cigarette smoker, at current prices of  up to $10 a pack, you can save more than $2,000 a year by quitting. Similar savings can be realized if you cut back on regular bar drinks of beer and liquors, and do most of your drinking at home. The added benefit is that you’ll enhance your chances for better health and safety in retirement.
9. Restaurants: You don’t have to give up eating out, but if you want to live within your retirement income, you’ll need to make some adjustments. Cut back on the fancy places with the fancy prices, and look for more modest cafes with high-quality food at moderate prices. If you’ve been eating out several nights a week, reduce it by one night.

10. Entertainment: If you had retired a generation ago, the advice would be to reduce your visits to movie houses. In today’s digital world, there are all kinds of large-screen TV, DVD players and other devices that show movies you once had to drive, park, line up to see and pay for tickets.

A first-run movie house charges $10 per person and up for each show. For that amount of money or less, you can rent DVDs for just a few dollars each, or see movies free on regular TV schedules.

11. Travel: Retirement years are supposed to be when there’s time for all the exotic travel destinations you’ve dreamed about during your working years. However, if money is tight, you’ll have to choose what you can afford. The cost of travel is influenced by various factors.

For example, if you book a five-day cruise over the Christmas holiday, it could cost $10,000 per couple. If you book at the less popular time of year, the price can be half or less.  If you want your travel budget to stretch as far as possible, keep in constant contact with current information from hometown and on-line travel agencies.

To make sensible adjustments to low income in retirement, clearly understand what your living expenses will be. Then cut back on costs to where you’ll realize the most savings with the least effect on your well-deserved retirement happiness and comfort.