Two of the largest concerns during retirement- regardless of age- are healthcare and debt. Debt has increased 543 percent among retirees in 20 years, as have the costs of healthcare. For retirees in their 60s, mortgages remain the number one debt commitment. The New York Federal Reserve Data puts auto loans and credit card debt at a close second and third. Meanwhile, healthcare costs will now cost a retired couple $285,000 throughout retirement. Both of these debts are large financial obligations in your monthly budget and if neglected, can cost you thousands in medical bills or late payment fees. That is why making it a priority to pay them off as soon as possible is a wise financial move.
Look at practical ways you can increase your debt repayments during retirement. It may mean refinancing to get a better interest rate or in the case of larger debts like home mortgages, downsizing your home to match your built-up equity. When it comes to healthcare costs, being proactive by getting health, long term care, and life insurance policies are the best protection you can have.
According to a Transamerica Center for Retirement Studies survey, approximately 11 percent of retirees are still repaying consumer debts including medical debt. Addressing the gaps in your healthcare coverage like the need for long term care means you are not left out of pocket should you require 24-hour outpatient or end of life care. If you have a bad medical history and are worried about the premiums, setting a guaranteed life insurance policy could be the answer: they negate prepossessed medical conditions and are often whole life policies, meaning no expiration dates. Alternatively, you could get a hybrid policy that includes long term care and death benefit element if you don’t need care.
Work On Reducing Your Living Expenses Now
Lastly, if you want to make your money last during retirement it is time to cut your expenses. While this financial move is recommended for all retirees, cutting expenses becomes even more important if your retirement funds are being depleted faster than you would like. Once you have eliminated larger expenses like existing debt and medical costs, it is time to turn your attention to other ways you can cut expenses as a retiree.
One popular way is by downsizing your lifestyle. Do you still need a family car or can you downsize to a small, more fuel-efficient vehicle? Similarly, would you be willing to downsize your family home during retirement? Other small but impact moves include tracking your spending habits, meal planning, and cutting out unnecessary utilities. If you are willing to spend an afternoon doing some research and comparison on utility prices, you find that you can easily save money on your utility bills every month.
Finally, consider getting some guaranteed income. If you retire early, you have the option of getting your Social Security benefits starting at age 62. However, choosing to get it earlier means your monthly amount decreases. So, establishing other guaranteed income streams like annuities and launching a side business helps to ensure you don’t outlive your savings even if you spend longer in retirement.