Many retirees are tempted to spend more money on leisure activities in retirement. Health care costs also tend to increase as people age. But there are many costs that decline in retirement – and a few you can eliminate entirely. Here are some expenses you will no longer have in retirement.
Paying off your mortgage eliminates one of your biggest monthly bills. While you will still have to pay for insurance and property taxes and continue to maintain your home, these costs are likely to be a fraction of what you were paying for your mortgage. There's also a big emotional payoff when you own your home mortgage-free.
Gas for your car or train fare is a big expense for employees with long daily commutes to work. In retirement, all your driving is for personal errands or pleasure, and some retirees are able to completely avoid traffic by skipping outings during peak travel times.
A second car
Dual-income married couples often need two cars to get to their respective jobs. If you're willing to coordinate your respective schedules, you might be able to get by with one car in retirement. This will also reduce your insurance and car maintenance costs.
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Some jobs require expensive professional attire, stylish haircuts and makeup and formal clothing for special events. Dry cleaning and professional tailoring cost even more. Retirees get to trade in their suits for jeans and don't have to keep up with the latest fashion trends unless they want to.
Time-strapped working people often spend money to save time. This might mean buying expensive convenience food because you don't have time to cook and outsourcing household chores so you don't have to spend your weekends doing them. Retirees can invest their time to save money by comparison shopping for good deals and taking on the home improvement chores they used to pay someone else to do.
Being involved in office social life comes with some costs. You might pay for lunch out with coworkers, chip in for gifts for colleagues or get drawn into the office pool. These costs are often a necessary part of team building with coworkers, but retirees don't have to pay them.
Paying full price
One of the major benefits of growing older is qualifying for senior discounts. The senior discounts available for hotels and car rentals are well known. But you may also qualify for discounts on necessities such as groceries. Not all senior discounts are advertised. Sometimes you have to ask, and be prepared to show ID.
Peak travel costs
Many working people cram their travel plans into long weekends and national holidays, and parents tend to vacation during school breaks. Airlines and hotels know this and set prices accordingly. Retirees can travel during weekdays and off-peak seasons, when the prices are lower and the crowds are smaller.
Take the time to review your investment portfolio, with the goal of reducing your investment costs. Make a note of the expense ratio of each fund, and challenge yourself to find a lower cost fund that meets your investment needs. You could be retired for several decades. Don't allow your investment returns to be dragged down by unnecessary costs.
A high tax rate
Many people drop into a lower tax bracket in retirement. Take steps to further reduce your taxes by carefully timing retirement account withdrawals. There are tax breaks specifically for people age 65 and older, including a bigger standard deduction. Some jurisdictions also have property tax breaks for older homeowners.
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