An article from CNBC noted that a report "…by Interest.com, finds that households headed by people who are 65 or older are bringing in median income of $35,107 a year, just 57 percent of the median income of households headed by 45- to 64-year-olds."
While this statistic might sound a little worrisome to some, it doesn't concern me all that much when it comes to our retirement plan. This isn't because we make so much money that 57 percent is more than enough; far from it in fact. However, we have other ways in which to compensate for a reduced income in retirement and that can help us stretch even an income that is cut almost in half.
Already knowing how to live affordably
Practice makes perfect when it comes to many things, and we've largely perfected the balance of living happily on a lower income. From cheap vacations and affordable fun around town to discovering how better to enjoy experiences with one another rather than tying our happiness to material possessions, we try to live an efficient and economical lifestyle.
Doing simple things like shopping resale, buying our food from discount grocers, knowing how to do many of our own home repairs, and learning how to grow our own food means that as we move into retirement and have more time on our hands, we can maintain or even reduce our already minimal cost of living even as income might be reduced as well.
Reduction in current living expenses
One of the biggest helps in retirement life when it comes to the possibility of living on a reduced income may be that of reduced living expenses. While our work expenses are lower since I can work from home, and we manage to minimize childcare costs by my caring for the kids as well, there are still related expenses that we hopefully won't have in retirement. With no children around, our expenses related to food, clothing, and utilities will likely drop. And without my wife commuting to work, our transportation expenses will hopefully fall as well. These two components alone could cut our budget by up to 5 percent or more.
There are all sorts of benefits that we may receive in retirement that we don't get now. First off, there is Social Security, which can help make up for some of the income we might lose in retirement. Then of course there is access to things like Medicare, a possible pension through my wife's employer, and then all the discounts. Seniors may be eligible to receive all kinds of discounted rates on things like transportation, lodging, entertainment venues, restaurants, various services, property taxes, and much more. With such reductions in costs at our disposal, we could recognize savings of between 5 and 10 percent or more of our current expenditures on such items as retirees.
Entering retirement with lower costs
Part of retirement planning that is difficult for many people comes by way of the costs that they carry into retirement with them. Things like a mortgage, a home equity line of credit, student loans, credit card debt, vehicle loans, and similar items can strap a retiree with many of the same payments they had before retirement, but with a lesser income with which to pay them.
Our family has worked hard to pay off such debt obligations of our own and have continued to work hard to remain debt free. Being able to enter retirement without a mortgage, vehicle loans and the likes, means that we will be free from these regular payment obligations, meaning that we hopefully won't need as much money to carry us through our golden years. Not only this, but according to creditloan.com, the average American's interest payments on debt is around $600,000 over the course of a lifetime. And without this additional financial obligation, we'll hopefully find it easier to reach a more stable retirement without as much in necessary income or savings over the course of time.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
- Personal Finance - Career & Education
- Retirement Benefits