Living comfortably in retirement is preferable to just getting by each month. Ideally, you’ll have social security income supplemented by distributions from a 401(k) and/or IRA. Use a retirement savings calculator to see what that combination could generate for you. Review the strategies below if you find that your projected retirement income is lower than expected.
Eliminate luxury expenses
Cutting out luxury expenses, aka non-essential expenses, is a strategy for any time of your life, not just retirement. Separate your monthly spending into “needs” and “wants.” If you’re preretirement now, sacrificing some extras will boost your retirement income later. You may already be doing this out of necessity if you’re currently retired.
Buy food and household goods in bulk
This strategy involves more than just buying the family pack of meat at the supermarket. Look for stores that specialize in discounted bulk items like large packs of paper towels, toilet tissue, and laundry detergent. The membership cost will pay for itself with the amount you’ll save on buying in bulk.
Downsize to a smaller living space
That three-bedroom house you raised your children in may be too much space for you during retirement, so it might be time to downsize. You can sell the house and buy a condo or small apartment. RVs are also a nice option if you like to travel. Trading a large space for something smaller can free up hundreds or even thousands of dollars you would have spent on rent or mortgage, heating costs, and electricity.
Buy generic medications when available
Always ask the pharmacist if there’s a generic brand available, especially if you’re paying out of pocket or have a high copay. Generic medications have the same ingredients as the brand name and are just as effective. There’s no reason to pay more when it’s not necessary.
Use public transportation or rideshare apps
You won’t need to commute to work anymore during retirement, so you’ll have less need for your vehicle. Paying insurance and maintenance costs for a vehicle doesn’t make sense if you don’t drive that often. If it works for your situation, you can sell your car to save money. Public transportation can be more cost-effective, and rideshare programs can also be convenient.
Maximize social security and retirement accounts
Wait until you’re 70 years old to take social security benefits if you can. The required minimum distribution (RMD) age for 401(k) plans and traditional IRAs is now 73 years old and increasing. Roth IRAs don’t have an RMD age. Speak with a financial advisor to understand these rules and maximize your social security and retirement accounts.
The Bottom Line
If you have a low retirement income, you can live more comfortably by cutting out luxury expenses and buying food and household goods in bulk. You can also downsize to a smaller living space and choose generic medications over brand-name drugs. Sell the car if you’re not using it. Reach out to a financial advisor today to learn more about maximizing your retirement income.