By Paul S. McNulty, CFP®
What does your ideal retirement look like? Traveling? Volunteering? Spending time with family? Taking up a new hobby? The possibilities are really endless. No matter what your ideal retirement looks like, we can all agree that it will be expensive. But what if there were steps you could take now to actively reduce the amount of money you’ll need later on in retirement? The good news is that there are! Today we’ll discuss 5 ways to prepare for a more affordable retirement.
1. Pay Off Your Mortgage
Your mortgage is arguably your largest recurring expense in retirement. Getting rid of this payment before you enter your golden years can significantly reduce the amount of money you need each month.
Start by calculating how much extra money you could throw toward your principal. Could you make one extra payment every few months? What about one extra payment a year?
If there’s not a lot of wiggle room in your monthly budget, consider cutting down on discretionary expenses. Or earmark any extra money you get from bonuses or tax refunds for your mortgage. Every little bit counts.
2. Downsize Or Relocate
If you’re still living in the same house where you raised your family, there’s a good chance you don’t need all that space in retirement. Downsizing may seem extreme, but it’s a quick way to reduce your long-term retirement costs, lower utility bills, and pay off debt. Plus, a one-story house with a smaller yard may be easier to keep up with as you age.
If you’re not tied down to your current city, take it a step further by relocating to an area with a lower cost of living. You might be surprised by how much further you can stretch your retirement dollars. For example, a $1 million nest egg lasts around 13 years in California, but 23 years in Mississippi. (1)
3. Travel During The Off-Season
Ask 50 people what they plan on doing in retirement, and I’m sure most of them will say travel. Whether it’s traveling across the country to visit the grandkids or traveling around the world to visit the Eiffel Tower, it’s on everyone’s list—and for good reason. After working 30+ years, you deserve to go to all those places on your bucket list.
But if you want to stretch your travel budget even further, consider traveling during the off-season. It has many perks. Not only are airlines, hotels, and activities cheaper, but you beat the crowds too! Plus, you have extra money left over to jump-start your next trip. Sounds nice, right?
4. Consider Long-Term Care Insurance
It’s estimated that nearly 70% of people turning 65 today will need some type of long-term care during retirement. (2) This could be anything from a home health aide (which costs an estimated $4,290 a month) or a private room in a nursing home (which costs an estimated $8,517 a month). (3) Unfortunately, these outrageous costs often result in financial plan failures for 32% of households with a $1 million net worth. (4)
So, what do you do? We recommend buying a long-term care insurance policy. While Medicare covers costs for acute illnesses, long-term care insurance fills in the gap by covering personal costs for health home aides, assisted living facilities, nursing homes, and more.
Studies show we’ll all have long-term care expenses at some point. Insurance helps preserve your nest egg and fill in the gaps where Medicare falls short.
5. Delay Social Security
The average life expectancy is 84.3 for men and 86.6 for women. If your health and family history indicates that you may live this long (or longer), delaying Social Security until age 70 could earn you thousands of more dollars in retirement.
For example, the chart below shows how much your monthly Social Security payout would be if your estimated payment was $2,000 at full retirement age and you claimed benefits at age 62, 66, and 70.*
| If you start collecting benefits at this age… | your monthly payout will be this much… |
| 62 (reduced benefits) | $1,500 |
| 66 (full benefits) | $2,000 |
| 70 (increased benefits) | $2,640 |
*Assuming a full retirement age of 66
According to this example, you earn $1,140 more a month if you wait to claim benefits at age 70 instead of 62.
How We Help You Prepare For A Stable Retirement
We hope that you’re able to implement some of these strategies today, so you can live out your retirement dreams during your golden years. And these are just a few of the many ways to prepare for a more affordable retirement!
We at Boston Metro Advisor are passionate about helping you live your ideal retirement life. If you’d like to chat with a financial professional about your current situation, we invite you to schedule a no-obligation conversation today. During this meeting, we review your current retirement plan, answer any questions you may have, and help you create a financial road map that leads to success. To get started, contact us by calling (781) 995-0253 or email me directly at [email protected] today!
About Paul
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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(1) https://finance.yahoo.com/news/long-1-million-retirement-last-090000023.html
(2) https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
(3) https://www.genworth.com/aging-and-you/finances/cost-of-care.html
(4) https://www.businessinsider.com/10-things-to-know-about-long-term-care-2016-9