Enjoying a financially successful retirement depends on two things: adequate savings and investments for income and a streamlined spending plan.
Boosting your income for retirement can be accomplished through savings and investments before you retire, continuing to work full-time or part-time for a few extra years and carefully determining the optimal time for applying for Social Security benefits.
Reverse mortgage for added income
Another option for seniors who are homeowners is to increase your cash flow with a reverse mortgage. A reverse mortgage, available only to seniors age 62 and older, allows you to use the equity in your home to pay off your current mortgage, pay other debt or simply have an available source of funds for an emergency. The amount you can borrow depends on your age and the amount of equity in your home. Consultation with a HUD-approved mortgage counselor is mandatory for all reverse mortgage applicants, so you can discuss how a reverse mortgage might fit into your financial plan for retirement.
Tackling the spending side of your financial equation is equally important. Reducing your spending in some areas can make it easier to spend on the activities you enjoy most during your retirement.
Eight budgeting tips
- Negotiate fees for auto care. If you have to get your car repaired or pay for routine maintenance, ask for a senior citizen discount or see if you can negotiate a payment plan.
- Use your AAA or AARP membership for discounts. Some people are shy about using their memberships for discounts, but these days, everyone is budget-conscious and trying to save in every possible way. You can save 10 percent or sometimes more on travel discounts, movies and more through these memberships that you may already have.
- Check on your insurance rates annually. Bundling your home and auto insurance can earn you a discount, but you should ask about other possible discounts for things like an alarm system or even belonging to an alumni group. An insurance agent could help you save hundreds yet continue to have adequate protection.
- Leave your credit cards at home. Studies show that people spend more money when they use a credit card. If you carry a balance from one month to the next, you are wasting your money by paying interest on the debt to the credit card company.
- Create your own debt reduction plan. If you have credit card debt, you need to tackle it as soon as possible. Make a list of your debts and the interest rates on each one. Then apply every available dollar to paying off the debt with the highest interest rate while paying just the minimum on your other bills. As soon as one has been repaid you can apply the extra money to the next debt until they are all repaid. Those last few debts should be paid more quickly since you will have more money to apply to them.
- Compare utility companies. Check out the competition for your phone, gas, electricity, water and cable companies to see if you can save on your current rates.
- Consider selling your car. While you may be accustomed to each family member having a car, it may be possible to share a car and eliminate the car payment, gas and insurance payment for that extra vehicle.
- Consider downsizing. Depending on where you live, you may want to think about selling your home and moving to a smaller or less expensive home. You can take out a reverse mortgage as part of the purchase of your new home so you can access your home equity.
While no one likes reducing their spending, taking a hard look at where your money goes can be a valuable exercise that will result in having more cash for the things you love to do.
