10 Ways to Retire on Less Money

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Getty ImagesYour retirement savings will stretch further if you take steps to reduce housing and entertainment costs.
By Tom Sightings

Don't let the financial experts scare you. Remember, it's in their interest for you to save more than you really need and then let them handle it so they can profit from your fears and anxieties.

Retiring on 100 percent of your pre-retirement income may be an option for one percenters who leave work with golden parachutes, but it's not realistic for the rest of us. Most of us will get by on a combination of some retirement savings in addition to Social Security and a pension if you still have one. Whether your nest egg is large or small, here are 10 ways to make it last:

1. Pay off debt before you retire. The first thing to do is count up your assets and debts. Hopefully, by the time you retire you have more assets than debts. You should no longer have student loans, and your mortgage might even be paid off. Now is not the time to take on new debt. If you have to float a big loan to buy a new car, it's probably better to keep the old one and fix it up.

2. Downsize your housing. Once your kids are grown you don't need three or four bedrooms anymore. A lot of retirees hang on to the old place in case the kids want to move back in. But this is a "what if," while the expense of carrying a home is a certainty. If your budget is limited, then move to a smaller place in a less expensive neighborhood with lower taxes and smaller utility bills.

3. Get a part-time job. Many people choose to work in retirement because they need the money, a place to go in the morning or some new friends. Retirees are no longer concerned about a career, so they don't need to stress out over promotions or workplace politics. Think of your retirement job like the summer job you had as a kid -- have fun, make a few bucks and then go live your life.

4. Share your home. If you're single, consider sharing a home with a friend or relative. Many older houses feature mother-in-law suites, and some newer construction offers two master bedrooms. Two can live cheaper than one, and this setup can offer companionship as well.

5. Rely on friends. Don't be afraid to ask for a favor and then offer to reciprocate. You can save a lot of money driving each other to the airport or the store instead of calling a cab. Exchange yard work for housework or financial expertise for culinary skills. Don't think you have to pay someone to do everything for you. Help each other out.

6. Search for free entertainment. If you want to cruise the Mediterranean, you may need 100 percent of your pre-retirement income. But most people don't do that. Your community likely offers free summer concerts and fall festivals. Check out your library for free seminars, book clubs, movies and lectures. Your church, veteran's association or social club can provide rewarding activities, all at little or no cost.

7. Eat out early in the day. We all like to splurge a bit and skip a turn in the kitchen. If you're going out for a meal, go early in the day. Breakfast is cheaper than lunch. Lunch is cheaper than dinner. If you insist on dinner, go early for the senior citizen discount. Or consider trying a place that serves breakfast anytime. Eggs and sausage are definitely less expensive than steak and potatoes.

8. Stop subsidizing your kids' lifestyles. The old saying goes: Give your children roots and wings. You've already given them roots. Now it's time for wings. It doesn't really help anyone to let them settle into their old bedroom. They need to find their own apartment, prepare their own meals and learn to live on their own.

9. Take advantage of discounts. Join AARP for discounts as well as supplemental medical insurance. Take a trip to town hall and find out about real estate tax breaks and other senior citizen discounts. Check out programs for free transportation, low-cost meals and subsidized health services.

10. Go international. Some people retire to the land of their grandparents, where they enjoy the support of family members. There are retirement enclaves in Mexico, Costa Rica and other Latin American countries. And a new trend points toward Asia and countries like Malaysia and Thailand, where the cost of living is low and people respect the elderly. Retiring overseas requires a lot of research, but it's an option more budget-minded people are considering.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.

10 Cities Your Financial Adviser Is Begging You Not To Retire To
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10 Ways to Retire on Less Money
  • Cost of living -- 114.1
  • State tax burden -- 8.4 percent
  • Median house price -- $377,625, per Zillow.com
  • Climate -- 69/39 January, 105/75 July
  • Traffic congestion -- Didn't make the Forbes list
Scottsdale is a retirement mecca, with a reasonable cost of living, state and local taxes well below the national average, a great quality of life and plenty of amenities. But housing costs are nearly double the national average. Winters are warm, but summers are sizzling hot. Peak temperatures can reach close to 120 degrees -- after all, it's in the desert. The locals will dismiss it as "dry heat," but that kind of heat will still send your electric bill for air conditioning soaring, and can necessitate you buying new cars more frequently than you'd like.
  • Cost of living -- 130.0
  • State tax burden -- 9.3 percent
  • Median house price -- $417,600, per Zillow.com
  • Climate -- 74/64 January, 89/80 July
  • Traffic congestion -- Didn't make the Forbes list

Key West offers Caribbean weather in the U.S., an attribute that makes it a natural choice for retirees. And who could resist the Jimmy Buffett-Parrot Head thing, especially once you're living a life of leisure? 

You might be better off if you resist. The cost of living is 30 percent higher than the U.S. average, and housing costs at least twice as much. Travel is another issue. Key West is the most remote location in the continental U.S. The only road off the 6-square-mile island is the Overseas Highway, a 127.5-mile causeway that is largely one lane in each direction.

Hurricanes -- all too common in Florida -- are rare in Key West  -- though Wilma did hit it in 2005. But when they do impact the island, though, it's worth noting that the city has the Atlantic Ocean on one side and the Gulf of Mexico on the other, and there's no part of it that's more than 18 feet above sea level. So homeowners must pay several thousand dollars a year for hurricane insurance.

  • Cost of living -- 132.3
  • State tax burden -- 11.2 percent
  • Median house price -- $482,000
  • Climate -- 66/50 January, 77/67 August
  • Traffic congestion -- Didn't make the Forbes list
As big California cities go, San Diego is a bargain. But compared to the rest of the country, San Diego is certified high-cost. Yes, the weather is near perfect year-round. But the cost of living is one-third higher than the rest of the country, and house prices are nearly 2½ times the national average. Add in California's high state and local tax rates and the earthquake issue, and San Diego should be crossed off your list of potential retirement cities.
  • Cost of living -- 165.7
  • State tax burden -- 10.2 percent
  • Median house price -- $680,000
  • Climate -- 80/66 January, 88/75 July
  • Traffic congestion -- Second worst gridlock in U.S.
Can you imagine a more idyllic place to retire than Honolulu? Probably not. But as beautiful as it is, it shares many of the financial strains common to other cities on this list, plus a few more.

The overall cost of living is second only to New York City. After all, most of the goods people need have to be shipped across thousands of miles of ocean. The state tax burden is only slightly higher than the national average, but the median house price is triple the national average.

Finally, as far as cost of living is concerned, Honolulu has an unusual financial issue: travel expenses. Sooner or later, you'll want to get away from Hawaii. And there's no cheap way to escape from this paradise.
  • Cost of living -- 164.0
  • State tax burden -- 11.2 percent
  • Median house price -- $860,000
  • Climate -- 57/46 January, 70/55 September
  • Traffic congestion -- Third worst gridlock in U.S.
San Francisco frequently makes those "favorite cities in America" lists and for good reason. Situated on a peninsula between the Pacific Ocean and the San Francisco Bay, it is one of the most scenic cities in the world. Mild weather year-round, world class cuisine, charming neighborhoods and an eclectic population make it one of the most desirable places to live anywhere in the world.

But it has the highest median house prices in the country, which should scare off retirees. Its cost of living trails only New York City and Honolulu. And like the rest of California, its state and local tax burden is second only to New York.

One other reason people might avoid living in San Francisco is that it's prone to earthquakes. While that's certainly a concern for personal safety, few people from non-earthquake prone areas realize how it increases your cost of living. Homeowners need to pay several thousand dollars per year for earthquake insurance.
  • Cost of living -- 140.1
  • State/district tax burden -- 4.0 percent on first $10,000 and up to 8.95 percent on income greater than $350,000 in D.C., 10.2 percent in Maryland, 9.3 percent in Virginia
  • Median house price -- $395,000
  • Climate -- 43/29 January, 88/71 July
  • Traffic congestion -- 10th worst gridlock in U.S.
Washington is centrally located, is filled with historic attractions and has some of the most beautiful neighborhoods in the country. It also has one of the highest effective local income tax rates in the country. The district taxes the first $10,000 of income at 4 percent, then 6 percent to $40,000, then 8.5 percent on all income over $40,000 (you can exempt up to $3,000 in retirement income).

Like other cities on this list, Washington sports a high cost of living and some of the highest housing prices in the country. The area also has its share of toll roads, and traffic is a recurring problem. This is especially troublesome during the holidays and summer months. Interstate 95 -- which bisects the metro area -- is the principal travel corridor between the Northeast and Florida. Making traffic matters worse: the near-permanent road construction projects.
  • Cost of living -- 136.4
  • State tax burden -- 11.2 percent
  • Median house price -- $456,000
  • Climate -- 68/48 January, 83/64 July
  • Traffic congestion -- Worst gridlock in U.S.
As recently as the 1970s, Los Angeles was widely viewed as the city that all America was looking to move to -- or at least to imitate. Perfect weather, endless beaches, palm tree-lined streets, plentiful housing, a powerhouse economy and the lure of rubbing elbows with a celebrity or two. Today, about the only things L.A. has going for it are near-perfect weather and In-N-Out Burger. The rest is mostly a faded memory. The city's success was, in fact, a key contributor to its decline: The near-doubling of the metro population since the 1970s has created East Coast levels of human congestion.

Property values are higher than New York's and nearly twice those of Chicago. The state and local tax burden in California is second only to New York, and the overall cost of living in L.A. is more than one-third higher than the national average. California's unfunded pension liabilities are nearly as high as those in Illinois, threatening serious tax increases that could squeeze retirees. Nagging quality of life issues include the worst traffic congestion in the nation and smog that could lead to higher medical costs.
  • Cost of living -- 132.5
  • State tax burden -- 10.4 percent
  • Median house price -- $370,000
  • Climate -- 36/22 January, 81/65 July
  • Traffic congestion -- Ninth worst gridlock in U.S.
Boston is the quaintest large city in America, sporting centuries-old but impeccably maintained architecture, neighborhoods and surrounding communities that just ooze with charm and close access to the beaches of Cape Cod and the mountains of Vermont and New Hampshire. If Boston were a less expensive place to live, it could well be an popular and smart retirement destination.

But it isn't. The high cost of living and high housing prices are the main reasons cited by former residents for leaving the state. The state tax burden is higher than the national average; the cost of living is about one-third higher than the national average; and house prices are nearly double the U.S. median. Translation: a large chunk of your retirement income would be spent just covering basic living expenses.
  • Cost of living -- 116.9
  • State tax burden - 10.2 percent
  • Median house price -- $247,000
  • Climate -- 32/18 January, 84/68 July
  • Traffic congestion -- Didn't make the Forbes list
Based on the numbers, Chicago wouldn't seem to be the retirement financial disaster that other cities on this list are. The state tax burden is only slightly higher than the national average; the cost of living is tolerably higher than the U.S. average; and house prices -- while higher than the nation in general -- are downright affordable compared to the coastal cities.

However, in addition to being a generally more expensive place to live than the nation at large, the area faces burgeoning problems just over the horizon. Illinois faces the highest unfunded pension obligations of any other state in the country, at around $100 billion. Chicago faces a nation-leading $20 billion unfunded pension liability. Such deficits scream out for higher taxes across the board. We can only speculate as to which taxes will be raised (or created).
  • Cost of living -- 216.7 Manhattan, 145.7 Nassau County
  • State tax burden -- 12.8 percent
  • Median house price -- $972,000 Manhattan, $440,000 Nassau County
  • Climate -- 38/27 January, 84/69 July
  • Traffic congestion -- Fifth worst gridlock in U.S.
The area has fantastic amenities -– theater, music, concerts, festivals, ethnic foods, diverse and quaint neighborhoods and close access to beaches and mountains. It also has probably the most comprehensive public transportation system in the U.S. But it breaks down spectacularly when it comes to the costs. The area has close to the highest cost of living in the country, which gets markedly worse the closer you are to Manhattan. House prices are out of sight, particularly in the more desirable communities and neighborhoods. New York State has the highest state and local tax burden in the country. New Jersey has the highest real estate tax burden in the country. And nearby Connecticut isn't much better.

Weather runs from winter-time deep freezes to protracted summer heat waves. The preponderance of bridges, tunnels and their tolls -- as well as antiquated roads running through quaint town centers -- makes congestion a constant problem, even on the weekends.
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