Retirement can be a wonderful thing, but it doesn’t necessarily come without its own set of challenges. When you no longer have the steady income of a job, it can sometimes be a struggle to make ends meet. If you’re living on a fixed income or worried about how long your retirement nest egg will last, it’s important to maintain an emphasis on saving money.
Being frugal in retirement doesn’t mean you have to live like a miser in later life. In this article, we’ll take a look at a dozen ways you can save more and spend less during your golden years.
Here’s How to Save Money in Retirement
Before you can understand how to save money in retirement, it’s first important to grasp how people tend to spend money in retirement.
The Employee Benefit Research Institute crunched the numbers using the latest data available for those age 65 to 74. They found housing takes up 43.9% of the average retiree’s budget. Next up is entertainment at 13.4%, followed by transportation at 11.9%.
Dropping down to the single digits, food is 9.0% of the budget, with health care (8.2%), gifts and other contributions (7.1%) and clothing (2.7%) rounding things out.
Now that you have an idea of what most people are spending money on in retirement, here’s how to save money in these areas…
Table of Contents
- Get on a Budget
- File for a Property Tax Exemption
- Pay Off Your Mortgage
- Downsize Your Home
- Travel During Off-Peak Times
- Find Free and Cheap Entertainment Options
- Use Public Transportation
- Pocket Your COLA
- Find Retail and Restaurant Discounts
- Get a Cheaper Cell Phone Plan for Seniors
- Stay Fit to Lower the Cost of Health Care
- Shop Prescription Costs
1. Get on a Budget
Budgeting is perhaps never more important than when you’re living on a fixed income, as many people in retirement are.
Maybe you’ve never budgeted before. That’s OK! We’ve got budgeting worksheets that utilize the CLARK Method available for free right here.
Hopefully your kids — if you have them — are financially established, and maybe you’re even getting close to paying off your mortgage. As a result, you may find that your budget has fewer line items in it these days than it did when you were younger.
If you want to take budgeting a step further, try zero-sum budgeting, where you give every dollar in your life a job each month before it hits your account. That way you’ll really seal up any small budget leaks in your life.
2. File for a Property Tax Exemption
If you’ve reached a certain age, you can often file for a property tax exemption of some type as a senior homeowner. For example:
- Alabama homeowners age 65 or older are exempt from state property taxes.
- Arizona offers seniors a refundable income tax credit of up to $502 for taxes paid on property.
- Some Delaware seniors don’t have to pay school property taxes, a savings of up to $400 annually.
- Florida offers some seniors an extra homestead exemption of up to $50,000 from select city and county governments, among other things.
- Georgia offers some homeowners exemption from all ad valorem taxes for educational purposes beginning at 62.
This is just a small sample of states that offer some kind of tax exemption for senior homeowners. A more comprehensive list is available here.
The reality is property tax law varies widely by state. Be sure to check your state’s department of revenue to see what’s available and what you have to do to qualify.
3. Pay Off Your Mortgage
Paying off your mortgage has psychological as well as financial benefits, according to financial advisor Wes Moss.
“In my book You Can Retire Sooner Than You Think, I conducted a study of more than 1,350 retirees across 46 states to see what makes the happiest retirees. One of the main recurring themes was that the happiest and most successful retirees had either eliminated or dramatically reduced their mortgage payment before pressing the retirement button.”
Maybe you’re in or nearing retirement and you’re going back and forth about whether you should or shouldn’t pay off your mortgage. Moss has a rule of thumb about when it’s acceptable to pull the trigger:
“My advice is to follow the one-third rule,” he says. “If you can pay off your mortgage using no more than one-third of your non-retirement savings, considering paying off your mortgage — today.”
4. Downsize Your Home
Another great strategy that retirees can use to reduce the burden of housing costs in their lives is to downsize.
Once you become an empty-nester, is it really necessary to have a three-to-five bedroom home anymore? The answer for a lot of folks is no.
Again, Moss has some words of advice to impart before you consider downsizing:
“If you are planning to move while in retirement, be sure that you can move into a new home without having a mortgage — essentially swapping your current home equity (or paid-off mortgage) for a home owned ‘free and clear.'”
5. Travel During Off-Peak Times
According to the ARC 2019 Air Travel Outlook Report, Thursday is one of the cheapest departure days for most economy and premium cabin air travel. Flying this day can save travelers around 10% on airfares.
When you’re caught up with work and family, you may not always be able to travel on a Thursday. But now that you’re retired, your time should be more flexible.
Take advantage of off-peak travel and get deals whenever they present themselves. Remember, there’s no longer any office or desk you have to be at.
This advice actually jibes neatly with money expert Clark Howard‘s one ironclad rule of travel: Buy the deal first… and then figure out why you want to go there!
6. Find Free and Cheap Entertainment Options
Want to really reduce the entertainment line item in your monthly budget? Then you should search out free and cheap entertainment options!
Getting started finding free or cheap events is easy. We’ve got a guide on how to do it here.
Some of the fun, free activities you’ll get leads on:
- Volunteer opportunities
- Time capsuling
- Free workout apps
In addition to these opportunities, some of the companies you do business with may offer free admission to fun events, too.
For example, Bank of America’s Museums on Us program gives its customers free admission to museums coast-to-coast on the first full weekend of every month.
7. Use Public Transportation
The average annual cost of vehicle ownership is $9,282, or $773.50 a month, according to the latest research from AAA. If you can give up your vehicle and get by with public transportation, that’s a huge chunk of change back in your wallet.
In some cases, people in retirement may not be able to drive, which makes public transportation a real lifeline. Plus, you can often get a senior discount on fares. So no matter how you look at it, public transportation is a no-brainer when it comes to saving money in retirement.
Of course, public transportation may not be a viable option if you don’t live in a metro area. For those in suburban areas, other more viable options that could still save you money may include ride-hailing services like Uber or Lyft.
8. Pocket Your COLA
If you’re already collecting your Social Security benefit, you probably know you get a small bump in your monthly check from year to year in most years.
This cost of living adjustment (COLA) tends to be somewhere in the 1% to 2% range. Essentially, that usually works out to be a boost of about $20 to $30 in your monthly check.
If you follow our advice in Step #1 of this piece — Get on a Budget — next year’s COLA could very well represent extra money that you could save each month!
9. Find Retail and Restaurant Discounts
The neat thing about senior discounts is you don’t necessarily have to be a senior citizen to get them!
We’ve got thorough list of offers in our article, 14+ Senior Discounts People Age 50 and Older Should Know About. Here’s a small sampling of some deals available through AARP:
- Hearing Shop: 15% discount on listening products. Get this deal.
- LensCrafters: Get 30% off complete pair, plus savings on an eye exam. Get this deal.
- Tanger Outlets: Free coupon book with up to $1,000 in savings. Get this deal.
- The UPS Store: Save 20% on all online printing services. Get this deal.
- 1-800-Flowers.com: Receive 20% off beautiful bouquets. Get this deal.
In addition to those offers, we’ve got a list of 20+ Senior Restaurant Discounts that you may want to check out. Again, some of these “senior” discounts are available starting at age 50!
Of course, it almost goes without saying that the best way to save money on food is to cook and eat at home as much as possible.
10. Get a Cheaper Cell Phone Plan for Seniors
How much are you paying for cell phone service? If you’re just going along with the same old cell plan you’ve had for years, the answer is probably too much.
Some carriers offer affordable plans specifically for people who are 55 and older. We’ve got a full run-down of options in our piece The Best Cell Phone Plans for Seniors.
And while great age-specific deals exist, there are even cheaper options. If you’re focused on price, you can find plans from just $10 a month! Read about them in our guide to the Best Cell Phone Plans and Deals.
11. Stay Fit to Lower the Cost of Health Care
The SilverSneakers program offers an affordable way for senior citizens to stay active. In fact, you can get a free gym membership through SilverSneakers, which is likely to be offered through your health insurance plan if you qualify.
With SilverSneakers, you get access to:
- Fitness equipment at more than 16,000 gyms and community locations across the country
- Group exercise classes for all fitness levels
- Pools, tennis courts and walking tracks
- Social networking through community events centered around health and wellness
- Online education, including nutrition and fitness tips
For more info, read our article 6 Things to Know About the Silver Sneakers Program.
12. Shop Prescription Costs
The frequency with which you need prescription drugs can go up as you age — as can the cost of those drugs.
To fight back against the high-cost of prescription drugs, try using a prescription savings app to help you comparison shop for the best price on your medications.
Here at Clark.com, we comparison shopped 15 of the most popular prescriptions in America across five apps. The results were clear: RxSaver offered the cheapest price or tied for the cheapest price in 10 out of 15 instances.
It can be easy to save money in retirement if you know how to get started. And without the distractions of work and a young family, you can really focus on becoming mindful about how you spend your money in your golden years. Maybe you’ve even come up with some creative ways to save money in retirement on your own. If so, we’d love to hear from you!