Yahoo Finance 25% of Retirees Plan to Live on $1500 per Month — Here’s What Experts Say To Do
Entering retirement may seem like a major life transition, especially when it comes to managing finances. According to a study conducted by GoBankingRates, 25% of respondents say they plan to live on just $1500 per month.
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While this may sound challenging as this amount is close to the poverty level for a family of two, it does not include housing costs. We’ve asked financial experts to weigh in and many have emphasized that with careful planning and well thought out strategies, it’s entirely possible to live on this amount during retirement.
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Budget Carefully and Cut Unnecessary Costs
Managing your retirement on a budget involves understanding exactly where your money goes.
“Make a strict plan on how to spend money every month and divide your necessary and non-necessity expenses,” says Shawn Carpenter, the Chairman and CEO of StockAlarm.
“You can cook food at home instead of going out often and cancel unwanted subscriptions to keep costs low.”
Carpenter also recommends choosing an area to live in that has a low cost of living and possibly earning some extra cash through a flexible side hustle if you feel $1,500 per month won’t be enough to live comfortably in retirement.
Some of the most lucrative side hustles for people over 50 include providing notary services, content writing, bookkeeping or driving for rideshare companies.
Consider Downsizing Your Home
Housing is often the most significant expense in retirement but even if you own your home outright, there are still costs like utilities, maintenance, and repairs to consider. Todd Stearn, founder of The Money Manual, says that downsizing to a smaller home or even relocating to an area with a cheaper cost of living can reduce property taxes, utility bills and upkeep costs.
“You can downsize your vehicle too to keep costs lower and avoid buying a brand new car or leasing vehicles if this was something you did before retirement.” Stearn says.
“The one thing I’d consider with moving to a cheaper area is that you want to be mindful of how far away you’d be from major cities with access to healthcare and other amenities since this could pose a challenge,” says Sebastian Jania, owner of the real estate investment company Ontario Property Buyers.
Relocate If It Makes Sense Financially
Relocating will involve moving costs and have other implications such as needing to get reestablished in a new city. But you can still research different regions and compare housing costs, taxes, utilities and other expenses. Some states have no income tax or offer tax breaks for retirees, which can significantly impact your overall expenses.
Jania says that living on $1,500 per month during retirement is definitely a possibility if you consider residing in certain states that tend to have a lower cost of living like Kansas, Mississippi or Alabama.
“Some other places in the U.S. that are very good for people to retire where your money can last longer include Tulsa, Oklahoma, or Knoxville, Tennessee,” says Carpenter. “If you are looking for adventure, places like Ecuador or Malaysia can offer a good life with less money than in the States.”
Don’t Forget About Taxes and Healthcare
If you’re looking to live on $1,500 per month, understanding the tax implications of your social security benefits, pensions, and any other income sources is also important.
“Two very important factors to consider when thinking about how much you are going to live on in retirement are taxes and healthcare costs,” says Chris Urban, a Certified Financial Planner (CFP), Retirement Income Certified Professional (RICP) and founder of Discover Wealth Planning.
Urban explains that taxes could be on income, property, sales or other local taxes where you are going to live. Consult a tax advisor to explore strategies for minimizing your tax burden.
“I also urge people to have a good understanding of their health insurance coverage including deductibles and maximum out-of-pocket costs as well as their healthcare needs if they are close to retirement age,” Urban says.
Consider Living Near Family and Choose Productive Hobbies
Living near family can provide emotional support and practical assistance, especially as you age. It can also reduce travel expenses for family visits and create opportunities for shared living arrangements, which can lower living costs.
Anthony Termini, a Senior Financial Editor at Annuity.org also recommends exploring hobbies and activities that interest you and can be done affordably. Gardening, volunteering, reading and joining local clubs or groups can provide a sense of purpose and community without overspending
“Having a green thumb and growing at least a portion of the fruits and vegetables you eat can easily save you $100 per month,” Termini says. “Also, picking up skills such as repairing things around the house can save you money as well so you won’t have to outsource those services.”
Living on $1500 per month in retirement may seem challenging, but with careful planning and smart strategies, it is achievable. Stearn also made a valid point that inflation will take a toll on how much $1,500 is worth by the time younger generations are able to retire so it likely won’t hold the same value that it does today.
Consulting with a financial advisor can also help you tailor some of these strategies mentioned above to your unique circumstances if you are planning to maintain a lower cost of living during your retired years.
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This article originally appeared on GOBankingRates.com: 25% of Retirees Plan to Live on $1500 per Month — Here’s What Experts Say To Do
