According to Investopedia, you should aim to have a retirement savings fund that allows you to live on 80% of your annual pre-retirement income. For example, if you make $50,000 a year before retirement, expect to need at least $40,000 a year to continue the same lifestyle you did prior to retirement.
Your retirement savings fund should be about six times your annual salary by age 60. If your yearly income is $50,000, you should have $300,000 saved up by age 60. However, at the $40,000 annual spending limit, you’re looking at running out of savings in less than eight years.
Therefore, saving money in retirement is key to stretching your retirement savings as far as possible. Start with these five tips for saving money in retirement.
1. Downsize
If you retire in your four-bedroom, three-bath house that you raised your kids in, it may be time to downsize. A mortgage payment for a home that big may not make the most sense for your retirement savings. Instead, you should either pay off your mortgage prior to retirement, allowing you to stay in your family home, or sell your home and purchase a smaller property or rent an apartment.
Any of the above options will likely save you money over paying a mortgage in retirement for a now oversized house.
2. Practice a healthy lifestyle
Another tip for saving money in retirement is limiting your medical costs. You can do this by practicing a healthy lifestyle. Creating a daily exercise routine is an excellent way to keep your bones, joints, and organs functioning properly. You’ll also want to maintain a healthy diet.
Another way to maintain a healthy lifestyle is to take advantage of your medical screenings. Medicare covers various medical screenings at 100%, leaving you with no cost generally. For example, Medicare covers diabetes screenings, mammograms, lung cancer screenings, and many other screenings.
3. Shop your insurance premiums annually
Something you may need throughout your entire life is insurance. Insurance premiums often increase each year due to inflation and other factors, such as aging. For example, Medicare premiums generally increase from year to year. While you can’t shop around in hopes of lowering your Part B premium, you can shop your Medicare plans annually to try and find savings that way.
Each year, Medicare beneficiaries are given the Annual Election Period to enroll in, change, or drop Medicare Advantage and Part D plans. You should use this period to shop your plans every year to make sure you’re enrolled in the most cost-effective plan each year.
If you have a Medigap plan, you can shop your plan anytime throughout the year and should do so after receiving a rate increase. Remember that applying for a new Medigap plan may mean going through underwriting, so don’t drop your current plan until you’ve been approved for a new one.
4. Utilize senior discount programs
Many organizations and businesses honor seniors by offering discounts. Utilizing these discounts is a great way to save money in retirement. For example, many drug manufacturers offer discount programs you may be eligible for, even if you’re enrolled in Medicare. Also, compare your Medicare Part D drug copays to GoodRx coupons. You can often save money on your medications by using a GoodRx coupon rather than billing your Part D plan.
Insulin-dependent Medicare beneficiaries can save a great deal on their insulin costs in 2021. Beginning January 1, 2021, beneficiaries enrolled in a Part D Senior Savings Model Plan can get their 30-day supply of covered insulin at $35 or less. According to the Centers for Medicare and Medicaid Services, Medicare beneficiaries should save, on average, over $450 a year.
5. Establish a withdraw plan for your investment accounts
If you have various investment or retirement accounts, such as a 401K and IRA, you should work with your financial advisor to establish a withdrawal plan. There are ways to withdraw money for your various savings accounts that, in the end, save you money.
For example, depending on the type of account, you may not want to withdraw too much in one year, or you may be bumped up to the higher income tax bracket. You also don’t want to withdraw too much too often, or else you’ll risk running out of your nest egg early.
Saving money in retirement is essential if you want your nest egg to last as long as possible. However, it would help if you didn’t have the constant worry of money on your mind during what’s supposed to be the most relaxing time of your life. These five tips should help you save money without causing too much stress in your day to day life.
