Accumulating the funds necessary to support yourself during retirement, a period that could easily span 20 to 30 years, is no easy task. But how much you need to accumulate is directly tied to your expected expenses during retirement. Go through your expected retirement expenses on an item-by-item basis. The key is to look for ways to reduce your expenses without reducing your standard of living. Consider these items:
- Pay off your mortgage.
Mortgage payments often consume 30% or more of an individual's gross income. Eliminating this expense can drastically reduce income needed for retirement. If you can't pay off your mortgage, consider selling your home and purchasing a smaller one for cash. Not only will you eliminate the mortgage payment, but a smaller home often results in lower utility bills, property taxes, and maintenance costs.
- Get rid of other debts.
It's not unusual for consumer debt payments to equal 10% to 20% of an individual's take-home pay. Try to enter retirement debt free.
- Keep your automobile.
Instead of purchasing a new car every couple of years, keep your current car for as long as it's in good working order. That will eliminate car payments from your retirement budget.
- Look for ways to reduce travel and leisure expenses.
Look for and use senior discounts. Plan activities for non-peak times, when rates may be lower.
- Consider relocating.
The cost of living varies significantly from city to city and state to state. You may be able to reduce your living expenses substantially by moving to another locale. However, this is more than a financial decision. You also need to decide whether you want to move away from friends, family, and familiar surroundings.