Many seniors have concerns about whether their savings will provide them with enough retirement income throughout the rest of their lifetimes. These worries may be justified, as it can be difficult to save enough for your later years.
The good news is, there are ways to make your funds stretch further after leaving the workforce. In fact, three Motley Fool retirement experts have provided their best tips here for making your retirement money go as far as possible.
1. Stay healthy to reduce healthcare costs
Katie Brockman: It’s no secret that we’re more susceptible to health problems and illnesses as we age, but some of those problems can be avoided by staying as active and healthy as possible.
The average 65-year-old couple can expect to spend roughly $300,000 on out-of-pocket healthcare expenses in retirement, according to the most recent research from Fidelity Investments.
Although healthcare can be costly for all retirees, those in poorer health tend to pay more. Among Medicare beneficiaries, those who consider themselves to be in poorer health pay an average of $1,700 more per year in healthcare expenses than those who are in very good or excellent health, according to data from the Kaiser Family Foundation.
While $1,700 per year may not sound like it would make much of a difference, it adds up over time. If you spend, say, 25 years in retirement and you’re spending an additional $1,700 per year on healthcare, that amounts to around $42,500 over the course of retirement. Regardless of how much you have saved in your retirement fund, there are probably plenty of other things you’d rather spend that money on.
Of course, there are some aspects of your health that you can’t control. However, you can do your best to maintain an active lifestyle, eat nutritious foods, and get regular checkups and health screenings. By avoiding as many health problems as possible and catching potential issues before they become serious, you can reduce your healthcare costs and put that money toward more enjoyable activities.
2. Downsize your home
Maurie Backman: Just as housing may be your greatest expense during your working years, it might also cost you a lot during retirement. That applies even if you manage to kick off your senior years mortgage-free. Downsizing to a smaller living space, however, could help your nest egg go further.
Even if you don’t have a mortgage any longer, if you downsize, you may be able to sell your existing home at a profit, purchase a less expensive one, and pocket the difference.
Also, the smaller your home, the less you’re likely to pay to insure it, and the lower your property tax bill is apt to be (assuming you stay in the same area once you’ve unloaded some square footage).
Smaller homes can also be a lot less expensive to maintain than larger ones. Think about it — there’s a difference in cost between heating and cooling a home that’s 2,800 square feet in size versus one that’s only 1,300 square feet. And if you unload some outdoor space, too, you may find that it costs less for things like landscaping and snow removal.
Of course, the one benefit of keeping a larger home is that it may be conducive to renting out. If you have a larger space with a separate area like a finished basement, you may be able to find a tenant and enjoy rental income each month to supplement your savings and Social Security benefits.
But otherwise, a larger home could be worth downsizing, especially if you feel money will be tight during retirement. And chances are, once you get used to your new space, you won’t miss your old one too badly.
3. Relocate to an area with a lower cost of living
Christy Bieber: If you’re facing a serious income shortfall, your best bet may be to change where you live entirely. That’s especially true if you currently live in a more expensive part of the country.
There can be dramatic differences in the cost of the essentials from one part of the United States to another. Housing, food, transportation, and medical care expenses can all vary, as can tax rules for retirees. Because there is so much regional difference in living expenses, where you live could be the key factor that determines whether your retirement money lasts.
To make sure your money goes as far as possible, research some of the places in the U.S. with the lowest living expenses where your Social Security benefits won’t be subject to tax. You may just find that some of the places on the list will work for you — and that a move can rescue you from a retirement full of financial stress.
Whichever approach you decide to take, the important thing is to make sure you’re maintaining a safe withdrawal rate to ensure your nest egg lasts. If you are spending too much in your current situation, something has to change.
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