Retirement can be a polarizing thought for millions of Americans. On one hand, it represents the freedom to sleep late, travel, enjoy time with family and basically choose how to spend your time. On the other, it poses the ever-so-important question: “How will I pay for it?”
If this is how you’re feeling, you aren’t alone in your trepidations. According to a 2015 analysis by the Government Accountability Office (GAO), 29% of households age 55 and older had no retirement savings or Defined Benefit (DB) plan.
How to make your retirement savings last
Whether you are a young professional with plenty of time to save or a seasoned employee approaching the next phase of life, every retirement dollar counts. Consider the following cost-cutting measures as you begin to plan.
1. Overhaul your budget
Your monthly expenses are likely to change once you leave the workforce so you may need to adjust your budget so you can avoid going into debt and potentially damaging your credit. (Yes, bad credit can be a problem in retirement, too.) For example, while you may cut commuting costs between home and the office, you might spend more money on travel or a new hobby. Consider making a list of expenses you expect to dwindle and compare them to the new costs you’ll take on during retirement. This may not help you know right away what your exact expenses will be, but it will help you get a better picture. (As far as your credit goes, you can keep an eye on that now and through retirement by getting your free annual credit reports.
2. Consider health care
Even if you qualify for Medicare upon retirement, it might be a good idea to take advantage of your employer-sponsored benefits before leaving the workforce. An analysis by Fidelity Investments found that a 65-year-old couple retiring in 2016 will need approximately $260,000 to cover health care costs, a 6% increase from the previous year. The analysis listed rising drug costs, annual inflation and circumstantial Medicare coverage as concerning for retirees on a budget. In the years leading up to retirement, it might be a good idea to schedule doctor appointments to address any health issues that could become costly as you age.