Helpful Tips for Keeping Retirement Costs Low

Joanna Stovic

The key to planning for retirement is to get your finances in order, and determine what brings you value. The earlier you can start to figure out the various pieces of the retirement puzzle, the sooner you can take off and enjoy the fruits of your labor.

Keeping costs low is an integral part of retirement planning. Here are some helpful tips for cutting costs without sacrificing value.

Use Projections and Budgeting

Retirement planning should start well before you’re reaching the golden years— the sooner, the better. To keep costs low during retirement, you need to have a big picture budget outlining everything you currently spend money on. From there, you need to use projections to determine how your spending and income will change in the future.

Creating a budget and projection plan will help you identify the magic number for your retirement. In other words, it will tell you how much money you need in the bank before you can hang up your hat and call it a day. 

Create a Debt Payment Plan

One of the essential parts of retirement planning is to get out of debt. If you’re in debt when you reach retirement age, things will be extremely challenging for you. 

Look ahead at what debts you currently have in place and make a payment plan to get rid of them. Some common debt payment solutions:

  • The debt snowball – paying off small debts and using the extra money to pay larger debts.
  • The debt avalanche – paying larger debts first to mitigate interest.
  • The debt landslide – paying down your newest debts first to boost your credit score.
  • The debt cascade – setting a recurring amount slightly over your minimum payment to slowly pick away at debt. 

If you have a mortgage, it’s also worth considering how you’ll eliminate it before you retire. Depending on your mortgage term and house size, this could include anything from selling and downsizing to running out the clock.

Prepare for Healthcare Costs

Planning for healthcare costs is a challenging part of retirement. As we get older, it’s natural that we have increased healthcare needs. Furthermore, retiring often means giving up company-led insurance. 

Set aside time to look at the best Medicare supplement plans for your needs and how you can use an HSA to fund future health treatments. 

Practice Mindful Spending

Building a healthy relationship with money and limiting impulse purchases is essential for keeping costs low before and during retirement. You’ll need to create a mindset shift that forces you to pause and measure each purchase’s value. Practicing mindful spending helps you understand the difference between being frugal and being cheap.

Consider what things or experiences are important to you in retirement. If you want to travel the world, then having a fancy car at home might not be worth the expense. When you feel compelled to purchase something, put it off for a few days or weeks. If you still feel as though you need it after time has passed, consider buying it. Otherwise, leave it on the shelf.

Remember to Plan for Taxes

Unfortunately, taxes don’t cease to exist when your work life comes to an end. You will need to pay taxes on withdrawals from your retirement fund, which will vary depending on the type of fund and size of the withdrawals. Even without a mortgage, your house will still be subject to property taxes.

Working with a financial advisor can help you better understand taxation and prepare so that you don’t end up in a precarious situation. 

With these tips, you can keep costs low during retirement and have a fun, stress-free experience. 

About Retire Early Lifestyle

Billy and Akaisha Kaderli retired three decades ago at the age of 38 and began traveling the world. As recognized retirement experts and internationally published authors on topics of finance and world travel, they have been interviewed about retirement issues by The Wall Street Journal, Kiplinger's Personal Finance Magazine, The Motley Fool Rule Your Retirement newsletter, nationally syndicated radio talk shows and countless newspapers and TV shows nationally and worldwide. They wrote the popular books The Adventurer's Guide to Early Retirement (Your Simple Path to FIRE) and Your Retirement Dream IS Possible.
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