Many dream of a retirement lifestyle in luxury. If you struggling to see how you can manage your current lifestyle in retirement, you are not alone.
It used to be that you worked for a private company for 20-30 years and you would be provided with a nice retirement pension that was more than enough to cover your expenses. Now pensions only seem to be for government employees and a few select companies who happen to offer them. And even the pensions are not covering all of your expenses.
The reality is that many people saving for retirement with a 401k vs a pension plan, are falling short when it comes to retirement savings. According to some experts, the average 401(k) account balance, in 2019, was around $92,000. Seniors are having to find creative ways to live on a budget in retirement. Many seniors today are asset rich and cash poor causing them to get creative with their finances.
Operate a Share House
Share houses are starting to become more popular with seniors but it can be tricky to navigate. Imagine living with one or two other couples or singles in one large estate-sized home. Remember the Golden Girls? Well, now some couples are doing it too.
If you have friends who have an aversion to ending up in a retirement home, this is a great way to live in a community and have each other look out for each other and share expenses. Everyone knows how Blanche, Rose, Sophia and Dorothy made it work. But how would couples be able to work this out?
Three couples in Australia did just this. After renting a large home together for two years, they decided to take the plunge and build a unique three-unit home. Each couple invested $250,000. They have separate quarters for each couple and common areas for everyone to enjoy. The concern is, of course, the long-term care plans and then the exit strategy. There are many questions that need to be answered. But it can and is being done!
As folks are struggling to live the lifestyle they want in retirement, this may be a great plan for those willing to live in a close-knit community with others.
Become An Ex-Pat
Often, US retirees will become what is called an Ex-Pat (Ex-Patriot) and move outside the US to an area with a significant difference in the cost of living.
Take Ecuador for example. I was just reading about a couple who moved there and their total expenses, including a housekeeper for their penthouse apartment, a robust restaurant and entertainment budget, runs about $1200 a month. Medical expenses in a country like Ecuador are pennies on the dollar compared to the US.
On average the cost of living in popular ex-pat destinations is anywhere from $1-2000 per month. Of course, you need to do research on what best fits your needs and take language barriers and health insurance costs into consideration. Here are the top 20 countries people move to in alphabetical order:
- Czech Republic
- Costa Rica
There are many things to consider when opting for an Ex-Pat lifestyle, like the stability of the government, friendliness of locals to US Citizens, Visa requirements, and moving away from family. We also recommend that you rent for a year before committing to living in a foreign country. However, most retirees have no regrets when they make the leap.
Something must be working because according to Social Security, over 400k Americans are receiving their benefits abroad. There are also SSA rules that must be met when moving to another country. Like you can not receive your benefits if you are living in a country with sanctions, like Cuba.
Downsize Your Home
Many people want to remain in the home they raised their children in. But you may be biting off more than you can chew as you start aging. Taxes, maintenance and expenses can eat away at your budget. You may also live close in to a metropolitan area where the expenses are much higher when you were working.
Many seniors also may have gained a significant amount of equity over the years which can help to fund your retirement. By downsizing your home you can literally fund your retirement once you purchase a smaller home in a more affordable area.
Move to Another Region or City
If you do not have what you need financially to remain in your current area during retirement, make sure you are open to other ideas on how to reduce your expenses like moving to another city. Often when people do the numbers from downsizing their home, they also find the region or city they live in is also too expensive.
If you are living in New York City or even a suburb of New York, like Long Island, the south can look very attractive. Many from California are retiring to the Banana Belt of Idaho or making the journey to Texas. They are finding low housing costs and tax-friendly states. Some who move to Florida from the Northeast are finding they can afford a better home than what they had for significantly less money. This leaves more money on the table for a better retirement.
Look for areas that are trying to attract retirees with great activities, low property taxes and no state income tax.
Budget, Budget, Budget
Your spending is usually your choice. Making sure you are debt-free and controlling spending can mean the difference between living well or having your finances be a drain. Set a budget and stick to it before and after retirement.
Also, annually, renegotiate your bills. You should be looking to reduce your insurances, interest rates, cable and cell phone bills at every contract renewal. Become a one-car family. Do you and your husband really need two cars and additional insurance during retirement? Overtime $20 a month can save you thousands when you have done it with 3 or 4 different service providers.
Never pay retail is my motto. I will wait for a deal or just simply not buy it. Clothing, vehicles, cruises and other travel all have heavy discounts throughout the year. I would rather get the better room at an off time of year than get the inside cabin at Christmas.
Cut Off the Kids
A 2018 Merrill Lynch study Showed that parents in the US are spending quite a bit helping their adult children with expenses. Collectively about $500 billion.
Parents paying their children’s cell phone bills, student loans and offering to help with down payments when they purchase a home are all things that take away from your lifestyle. It may be time to cut the cord. Remember, every dime that leaves your pocket is less that you have to travel, explore hobbies, and expand your horizons.
Even if you are struggling to come up with ways to live your current lifestyle with what you have allotted for retirement, you can see there are creative alternatives available. You may even be disappointed that you have to make these changes. But sometimes having an open mind and remaining flexible can bring new experiences that you did not think were obtainable.