7 Ways Baby Boomers Can Cut Costs Before Retiring
You probably envision a retirement filled with travel, hobbies and playing with your grandchildren. The last thing you want to worry about is money in what are supposed to be your carefree years.
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But Americans are notoriously unprepared for retirement. A Vanguard study from 2021 showed that among its plan participants, the average account balance was $141,542. The median balance was just $35,345.
So, for baby boomers who plan to retire in the next few years, one thing is paramount: ramping up retirement savings. But how do you do that? By cutting expenses to start. GOBankingRates asked the experts for ways you can save money with retirement on the horizon, and they offered seven ideas for baby boomers. Some might prove easier than others to execute, but all are worth the effort.
Get Out of Debt
Before retiring, pay off your debts – especially those credit cards. The monthly payments, not to mention the 20%, or higher, interest rate will do nothing but take a significant chunk out of your retirement savings and income.
“The absolute number one thing I would recommend people do before retiring is to get completely out of debt,” said Derek Sall, the founder and lead at Life at My Finances. “The idea is to get your expenses down to the lowest number possible so that you can retire without the worry of ever running out of money.”
On his website, Sall has his free debt snowball spreadsheet that allows users to enter all of their debts to see just how long they’d take to pay off if they made only minimum payments. Then, they can add in an extra monthly payment to see how quickly they can get out of debt by paying extra each month.
“The debt payoff window usually goes from 10 years down to 1.5 years just by entering an extra $500 a month or something. It’s an amazing tool that really motivates people to get out of debt,” Sall said.
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Downsize Your Home
The home where you raised your family undoubtedly holds special memories, but it might not suit your needs anymore – and it could be costing you money.
“By hanging on to a large house, you’re paying extra money in taxes, maintenance — both on the house and the property — and utilities. It all adds up,” Sall said.
If you’re close to retirement and plan to move to a smaller home or even another area down the road, start preparing your home for sale now with a fresh coat of paint and other changes to increase the curb appeal and marketability of your home.
Hack Your Monthly Bills
You could be wasting money on bills you didn’t even realize you had, and you can use that money for other purposes, said Andrea Woroch, a consumer finance expert.
“Spend time reviewing your monthly expenses for potential savings,” she said. “Begin by negotiating rates with current providers, cancelling unused subscriptions, increasing your insurance deductible, unplugging unused gadgets and looking into cheaper providers such as switching to an online-only wireless carrier like Mint Mobile which offers talk, text and data for just $15.
“It’s also a good idea to shop around for auto insurance to see if you can find cheaper rates.”
Cut Grocery Expenses
“Grocery prices are skyrocketing but you can control how much you spend on food by simply reducing how much you buy and toss away by planning out meals,” Woroch said. “Look for recipes that use overlapping ingredients and stick to the shopping list.
“Considering Americans spend $412 per month on groceries, or $4,942 annually, and it’s estimated that the average U.S. household wastes 40% of the food they buy, that’s around $1,976.80 of grocery purchases that end up in trash per year.”
Woroch recommended taking inventory of what’s in your refrigerator before making a shopping run so that you don’t wind up with excess food, like five containers of sour cream that go bad before you can use them.
She also suggested using apps to maximize your savings. “Rewards apps like Fetch will give you cash back for your grocery purchases that you can use to offset your future purchase needs and stash it away,” she said.
Plan Vacations Carefully
Everyone loves to take a vacation, but Justin Albertynas, a travel and money-saving expert, said boomers close to retirement should take extra care in planning their trips.
“Although it might seem that baby boomers don’t travel or spend on vacations that much, they’ve been increasingly active in travel,” said Albertynas, the CEO of travel website Ratepunk. “They now have more disposable income and free time compared to other age groups, making travel a popular pursuit before and during their retirement years.”
Still, with retirement approaching, Albertynas said it’s wise to utilize ways to save money when traveling.
“Take advantage of senior discounts. Many airlines, hotels and attractions offer special deals for seniors,” he said. “Research and compare different options to find the best deals available for your desired destinations, and don’t hesitate to ask for more information about the discounts that can be applied.”
He also advised taking advantage of all-inclusive packages, which include meals, accommodations, entertainment and activities in one upfront price, and traveling during the offseason.
“Consider traveling during non-peak times when prices for accommodations and flights are generally lower,” he said. “This can help you save significantly on your travel expenses. Moreover, many destinations have mild and pleasant weather that’s not too hot during these months.”
Reduce Car Expenses
Sall said it’s important to look at how much you are spending on your car now and what your needs will be down the road.
“What kind of car do you drive? Does it have payments? Is it pretty expensive and causes you to spend a lot of money on insurance each month? Perhaps it’s time to downsize that as well,” Sall said. “Instead of having a $60,000 truck or luxury car, maybe you just need a nice Honda Accord or something. You’ll save in gas, insurance, and monthly payments.”
Reduce Spending on Extras
If you don’t track your monthly spending, start doing it. You’d be surprised how much extra money you might be spending on lunches out while working, that fancy coffee on the way to work or even the soda out of the vending machine.
Reduce spending on those extras and put what you would have spent — $50 a week? $100 a week? – toward your debt and watch your balance shrink. If you’re debt free, pack your lunch instead of eating at a restaurant and put the savings toward your retirement fund.
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This article originally appeared on GOBankingRates.com: 7 Ways Baby Boomers Can Cut Costs Before Retiring
