For many pre-retirees, the prospect of life without a paycheck is scary. There are no more biweekly checks, raises, bonuses or promotions. Then experts from financial firms come along and stoke our anxiety with their sometimes unrealistic recommendations about how much money we need to have in our retirement plans (which they will be happy to manage, for a fee) to guarantee a comfortable retirement lifestyle. Some say we need $1 million each; others recommend 20 times our last annual salary.
The financial experts are right, in principle. We do need a lot of money to retire, generally in the form of Social Security, plus pensions, 401(k) plans and IRA balances, as well as the value of the help we get from family and friends. But maybe we don't need quite as much as the experts would have us believe.
Why? Because after we retire, our expenses go down automatically. And there are plenty of pain-free ways to push them even lower. Here are ten ways we save money in retirement, without adversely affecting our lifestyle:
1. Clothes. You will no longer need expensive business suits, or uniforms that you have to pay for yourself. And there’s no more need to buy and inventory a closet full of shoes for every occasion.
2. Commuting costs. We no longer have to buy a commutation ticket for the train, or pay bus fare or parking fees. If you drive 20 miles to work every day, you'll save almost 10,000 miles a year, which at the IRS mileage allowance of 56.5 cents a mile, equals more than $5,000 a year.
3. Lose a car. If you're no longer commuting, maybe you can sell off one of your two or three cars, because you don't really need it anymore.
4. Less insurance. If you get rid of a car, you're not paying insurance on it. Maybe there are also other insurance policies you don't need. For example, if your kids are grown, maybe you no longer need life insurance.
5. Move. You're no longer tethered to your place of work. So you may have the option to sell your house and move to a less expensive neighborhood. You don't necessarily have to relocate to Florida or Texas, either. Sometimes moving 20 miles farther out from your business hub can save a huge amount of money, mostly in the price of the house and the real-estate taxes you pay.
6. No more kids. You spend a lot less after your kids have finished school and moved out on their own, an event that often coincides with retirement. There’s no more college tuition draining your savings account, no extra car in the driveway and you won't believe how much you'll save on your grocery bill.
7. Travel. Of course, you can always spend boat loads of money if you go first class to all the hot spots. But the beauty of retirement is that you can travel mid-week, when air fares are cheaper, or go during the shoulder season, when rates are lower. Your flexibility means you can take advantage of websites offering alternative accommodations, such as Airbnb or Cyberrentals. And don't forget, you can always go visit the kids.
8. Entertainment. Don't be embarrassed to use a senior discount at the movies or a state park or the America the Beautiful senior pass for national parks. Many state and local governments also offer discounts to senior homeowners. Take advantage of the flexibility you enjoy by not having to be at the office from 9 to 5 every day. Go out to lunch, instead of dinner. You often get the same food at a much lower cost. Play golf weekday afternoons instead of weekend mornings, at a lower rate. And check out your community offerings, from free lectures at the library to free exercise classes at the senior center.
9. Now you're the boss. You used to pay for the premium cable package, because the kids insisted on it. Maybe you don't need that anymore. Downgrade your cellphone service if you don’t use the minutes. Cancel your membership to the swim club, if you're not using it. Look through your credit card bill. What are you paying for that you no longer use? Now is the time to cancel the charges that are there for your kids, and pare down to activities important to you.
10. Save on saving. You no longer get a paycheck, so you don't have to tithe to Social Security anymore. You're now on the receiving end of the program. And, remember, now that you're retired, you no longer have to put aside 5 or 10 percent of your income to save for retirement.
Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.