Eight Ways to Manage on a Fixed Income in Retirement

You’ve probably been looking forward to taking it easy now that you’re through with a 40 or 50-hour work week, but entering retirement brings its own set of challenges – the most pressing being managing your budget on a fixed income. Now, more than ever, is the time to be wise about managing your saving and spending. Read on for ideas on managing on a set monthly income without going into debt.

Reassess Your Budget

When transitioning to a fixed income, you need to re-evaluate your budgetary needs. It is important to document all your sources of income and assess what your expenses will be. It is likely that your expenses will be different in retirement, but some of them may be naturally lower such as transportation to and from work, or clothing allowances for work attire.

It is important that you document all your income and expenses to identify whether you have a surplus or deficit. If you have a surplus, congratulations, you’re on the right track, but may still benefit by looking for creative ways to cut back. If you have a deficit, let’s look at some ways that you may be able to stretch your budget.

1. Cut Insurance Costs – Re-evaluate your insurance needs. If you were carrying extra life insurance when you had children that have since grown, now is the time to consider dropping it. Also, talk to your insurance agent to see if you can save by raising deductibles on either your home or auto insurance. If you are driving less because you no longer commute to work, you may automatically qualify for a discount.
2. Sell Your Second Vehicle – If you and your spouse each have a car, you should consider selling one. You may not only be able to make some money, but you will save money on insurance, repairs, and any payment for the second vehicle as well.
3. Downsize your Home – If your children have moved out on their own, and you have a house that is bigger than you need, you can save a lot of money in heating and cooling, insurance costs, and repair and maintenance by moving into a smaller home. If you have significant equity in your home, this can also be a nice boost to your retirement nest egg.
4. Take in a Boarder – If you have extra bedrooms, but don’t want to move, consider renting a room to another senior, or even a younger person who may be able to help around the house. If you’ve never done this before, make sure that you get references and a security deposit and consider talking to someone who has experience renting to others before doing so yourself.
5. Consider a Reverse Mortgage - If you own your home and are over the age of 62 then you can draw on the equity of your home through a reverse mortgage. You can use the money however you want and you make no monthly payments for the duration of the loan. The loan is not due until you move out permanently or the last surviving spouse passes away. Upon death, any remaining equity in the home passes on to your estate. Before deciding whether a reverse mortgage is right for you, consult with a financial advisor, and you can find answers to Frequently Asked Questions about HUDs Reverse Mortgages on the U.S. Department of Housing and Urban Development’s (HUD) website, 
6. Ask for Senior Discounts –Make sure you take advantage of senior discounts. There is no sense in paying 15% more for something when your years of experience entitle you to pay less. For a nominal annual fee, AARP also has discounts exclusively for their members over 50 years of age.
7. Cut Prescription Costs - Don’t forget to ask your doctor if there are generic versions of any medication prescribed to you. Make sure you explore Medicare, which provides information about discount programs in addition to free medication.  
8. Consider Part time Work – Just because you’ve retired from your life career, doesn’t mean you can’t still find fulfilling work. Maybe you can offer consulting services if you have gained years of experience in a particular industry. Or, now may be the perfect time for you to pursue work that you truly enjoy instead of just collecting a paycheck. Check with your local senior center to see if they offer any job counseling or placement services.

Between inflation and the ever-rising cost of living, you may find it challenging to live on a fixed income, but use some of these tips to make your life comfortable and affordable while saving money and not going into debt.  For some great advice on managing well on a budget, check out the CareOne Article Library.

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