Although your CalPERS service retirement is a lifetime benefit, and you have other income sources available to you, money can still be tight. Making ends meet is a big concern for many retirees.
Here are six tips for saving money during retirement, as part of our series on Planning Your Financial Future.
- Get back to basic budgeting. Determine how much money you have coming in, how much is going out, and where it’s being spent. If your expenses exceed your income, look for ways to reduce your expenses, increase your income, or both. Identify what you need vs. what you want as a way to cut unnecessary costs. Don’t forget to plan for the unexpected, such as car repairs and out-of-pocket medical costs. Most experts recommend having savings that cover 3-6 months of living expenses.
- Be mindful of risk. Personal savings and investments can be an important component of your retirement income. Whether you rely on a defined contribution plan, such as a 401(k), a money market account, or more, these investments can carry some level of risk. Higher risk can mean greater returns, but could also lead to great loss. Even in retirement, it’s important to diversify your investments as a way to reduce risk, and mix your savings across a wide variety of investments to minimize the impact any one will have on your funds. And be sure to consult a professional financial adviser.
- Manage your debt. The best way to avoid debt is to take proactive steps to prevent it, such as paying off credit cards each month. If you find yourself in the red, add up your total amount of debt (credit cards, car loans, etc.) and consolidate it. For example, combine all of your credit card debt onto the lowest-interest-rate account you have. Then prioritize payments, perhaps by putting the most money possible to the smallest debt balance; once that’s paid off, add that payment amount to the next smallest debt, and so on. Be patient, stick to a plan, and you might be debt-free soon.
- Assess your living arrangement. A big part of your budget may go to housing. Many retirees consider downsizing as a way to save money on rent, mortgage payments, property taxes, or upkeep costs. If you decide to downsize, save the difference or put it toward more of your needs.
- Calculate health care costs. Whether you have health benefits through CalPERS or not, it’s important to know the costs and covered services of your health plan. When evaluating your plan’s features, look at the monthly premium amount as well as procedures, deductibles, and co-payments that may impact your wallet. Factor in any dependents’ medical costs, and whether you’re making changes that might impact your health plan availability, such as moving to a new location. Finally, it’s important to consider a plan for long-term care should you need help with activities of daily living due to illness, disability, or aging.
- Examine your Social Security options. Full retirement age, as defined by the Social Security Administration, is 65-67 years old. This is the age you can begin receiving the full benefit you’re eligible for. Or you can wait until age 70 to earn an increased benefit amount. Consider waiting a few more years to draw Social Security if you think it will help you reduce your monthly spending. You may be able to get additional income through the Supplemental Security Income program, which helps seniors and people with disabilities who have limited income and financial resources.
