How to Live Happily on Your Retirement Income

Retirement is a time to enjoy the fruits of your labor, whether it’s pursuing your passions, spending more time with your loved ones, or exploring new places. While saving for retirement is important, it’s not the only factor that determines your quality of life.

There are many ways to supplement your retirement income and make it stretch further, even if you haven’t been able to save as much as you’d hoped. Social Security is one source of income that can help you cover your basic expenses, but there are other options that can enhance your retirement lifestyle.

With some planning and creativity, you can live happily on your retirement income.

The 80% Rule 

When it comes to saving for retirement, the commonly accepted rule is that you need an annual retirement income that equals at least 80% of your final annual working income. If you bring in $50,000 annually pre-retirement, then you will need at least $40,000 annually to maintain a similar lifestyle after you retire.

But what if you don’t want to maintain your lifestyle? What if you want to start traveling more or indulge in your favorite expensive hobby – or just stay home and read? The 80% rule can be used as a guide, but from there you need to adjust up or down according to your retirement plans. 

4 Tips for Living on Retirement Income 

1. Work Part Time 
   Whether it’s to supplement income, to stay physically and mentally busy, or to have fun and make friends, seniors are remaining in the workforce for much longer – a trend of unretirement that’s expected to continue. You might consider a role that aligns with your personal passions or work as a consultant in the industry you retired from. Keep in mind: If you start working again after you begin drawing Social Security benefits, your benefits might be reduced if you earn above a designated amount. Check with the Social Security Administration for the most current information on work limitations after retirement. 
2. Take Advantage of a Health Savings Account 
   An HSA is a specialized savings account that may be available to individuals with a high-deductible health plan (HDHP). An HDHP may offer you a lower monthly premium, but you’ll pay more for healthcare services until your insurance coverage kicks in. When you combine an HSA with an HDHP, you set aside money on a pre-tax basis to pay for qualified medical expenses. Your HSA balance rolls over every year, so this account allows you to build up your savings to pay for healthcare services and supplies you may need later. HSAs are helpful in covering medical costs, but what many people don’t realize (or take advantage of) is that HSAs can also be an investment tool that helps pay for medical expenses in retirement. 
3. Downsize
   Minimizing your living expenses by downsizing can give you more breathing room in your budget and more cash to put toward things you love. A multifaceted approach to downsizing is often the most effective.
   • Shrink your housing costs. Moving into a smaller place in a more affordable part of town can reduce your living expenses by a notable amount, especially if your current home is large or not fully paid off. Consider making this change if it would decrease expenses like your mortgage, property taxes, maintenance, or utility costs. 
   • Profit from your unused items. Old furniture, instruments, clothing, and other items that have been kept in your attic, basement, or storage unit for years could earn you some cash. Host a garage sale or list items on digital marketplaces to have more space in your home and more cash in your pocket. 
   • Rethink your transportation. If you have more than one vehicle or live in an area with affordable public transportation options, consider selling your car. This can help decrease your total debt and ongoing expenses like auto insurance, registration, fuel, and maintenance.
   • Make and maintain an updated budget. Your post-retirement needs, wants, income, and financial goals are likely different than your pre-retirement ones, so you need a budget that reflects this. Calculate your annual retirement income – including from Social Security, personal savings, retirement accounts, and investments – and determine if it will cover your current expenses. Then, review your expenses to identify opportunities to cut back. 

4. Relocate 
   If you’re looking to stretch your retirement dollars while creating new and exciting memories, making a big move could be right for you! There are plenty of places in the United States where your retirement income will go even further. You just need to do your research. 

   Remember putting down new roots is different than vacationing, so it’s important to get a real sense of the area’s affordability for residents. Consider the following aspects: sales tax, income tax, property tax, food and fuel prices, home prices, income levels, utility costs and more. 

   You’ll also want to research the area’s quality and affordability of healthcare, work opportunities and safety rankings. 

Reach Your Retirement Goals

With a few adjustments to your lifestyle and expenses, you can build a healthier financial picture to support your golden years. 

If you need help getting started toward your retirement goals. We’re here to help. Check out our Individual Retirement Accounts.