Your working days may be over, but you still have some important jobs: Seeing friends and family, resurrecting old dreams and managing your money. At your age — or any age, really –smart finances depends on smart spending. Whether you’re entering retirement with a hefty nest egg or a tight budget, you can take steps to make your later years as comfortable and secure as possible.
Follow the money
“Retirement is all about cash flow,” says Kathryn Fitzgerald, MSFP, CFP, a financial planner with the Napa Planner Financial Group in California and a member of the National Care Planning Council. To really get a hold on your spending, you have to take a close look at where your money is going. Make a list of all of your obligations, including insurance, phone bills, utilities and groceries. For a big-picture view of your finances, use the AARP’s online retirement calculator to help you keep track of how much money you have and how long it will last. You have to make sure that you aren’t burning more than you have to spend each month.
Get an insurance check-up
If insurance premiums are eating away at your savings, it’s time to give yourself an insurance check-up. Fitzgerald advises clients to start by looking at their car insurance. If you’re driving an older car, you probably don’t need to be paying for a Cadillac plan with a low deductible and a high premium. Also, look at the money you’re spending on healthcare to see if you can get a better deal. The Medicare website features a free Plan Finder you can use to compare health and drug plans.
Keep tabs on everyday expenses
If you aren’t careful, everyday expenses can be a huge drain on your savings. To protect yourself and your retirement, think about the small expenses that can add up. Start with groceries. Make coffee at home instead of buying fancy (and expensive) drinks at the coffee shop. Many grocery stores offer senior discount days–a perfect time to stock up. Fill your shelves with healthy staples and keep some fresh and frozen produce on hand. Remember that a home-cooked meal is almost always cheaper than anything you can buy in a restaurant, even a fast-food restaurant. If you have a limited income, you can apply for a free cell phone through the federal Lifeline program.
Take the “want” vs. “need” test
The AARP recommends using the “want vs. need” test when shopping. Before buying something, ask yourself if you really need it or just want it. If it’s a want, you should at least consider putting it back on the shelf. If it’s a need, look around for the best price. Another AARP tip: Use cash instead of plastic. You’ll have a better sense of how much money is actually leaving your pocket, and you’ll be less likely to overspend.
As you get older, you may not need as much space as you once did. Selling your house and moving to a smaller place can lower your monthly expenses and add a big cushion to your savings. As a bonus, the profit from selling your house is tax free, as long as it’s less than $250,000 for a single taxpayer or $500,000 for a married couple filing jointly.
“There can be a significant advantage to downsizing,” says Steve Vernon, FSA, president of Rest-of-Life Communications and a research scholar at the Stanford Center on Longevity. “A lot of people don’t realize it until it’s too late. Think about moving to a place that’s smaller, that has less maintenance, closer to public transport possibly. In the process of downsizing you may eliminate the mortgage. These are all good moves to do in your 60s and 70s. Beyond that, you might not have the energy.”
Take advantage of tax breaks and discounts
Nobody enjoys spending money on taxes. As a senior, you should take every break that you deserve. Take medical expenses, for example. If you’re 65 or older, you can deduct all medical and dental expenses from 2016 that go beyond 7.5% of your adjusted gross income. Remember that charitable donations are deductible, too. If you have a limited income and own your own home, you may qualify for a state program that can substantially cut your property taxes. And don’t forget all the senior discounts for everything from bus tickets to museums.
Don‘t skimp on, routine dental care
Medicare doesn’t pay for routine dental care, such as cleanings and fillings, so it may be tempting to put off seeing the dentist. But set up regular check-ups and always see your dentist if you feel even a small twinge in your tooth. You may end up paying a relative small amount to fill a cavity instead of hundreds of dollars or more for a root canal.
Put your money to work
If you think you need a backup plan, you might consider using a retirement tool such as a reverse mortgage. (Just remember that you still have to pay property taxes, homeowners insurance, and home maintenance costs.) In addition, delay taking Social Security until age 70 if you can – the monthly payments will be larger. If you have some money to spare, the best way to spend it is to put it to work. People with sizable savings may want to risk some of it in the stock market, Fitzgerald says. But people who can’t afford to lose any or all of their investment should choose something more reliable, like a bank CD (certificate of deposit). “If you only have a little bit of money, the stock market isn’t for you,” she says.
Your later years can be some of your best years. Just have a plan, stick with it, and enjoy everything you’ve earned.
Chris Woolston, M.S., a former Time Inc. Health staff writer, is a freelance science, business and travel writer who writes about insurance for MoneyGeek.com.