Top 5 Factors That Can Derail a Baby Boomer’s Retirement – Factor #2: Managing Expenses

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Talk to a typical Baby Boomer and ask them about their retirement plan. Most of the time, they will describe what I refer to as the “A” plan. This is the ideal American dream. Work hard, enjoy life, save a little, retire at age 65 (at the latest), and enjoy the “Life of Riley” in retirement. But, how often does the “A” plan get derailed?

From my experience, more often than you probably think.  I have found 5 major factors that can significantly affect each individual or couple’s ability to retire comfortably.  Last month I reviewed the first factor (credit card debt).  I will expand on the last 4 over the next few newsletters.

Factor #2 – Managing Expenses

Most Americans over the age of 50 are concerned about their retirement. The closer they are to retirement, the greater their concern. Their investments may have taken a pretty good hit over the past ten years, so much of the perceived wealth that the Baby Boomer’s had has evaporated. In spite of that, many simply focus on their savings and believe that if they just save enough before they retire, they will be okay. But, how much savings is enough is the tough question. And it’s not necessarily the only place they need to be focused. They need to project how much they expect to spend in retirement, taking inflation and taxes into consideration, and compare that to what they might expect to earn on their savings. Those expectations have had a rude awakening over the recent past. Controlling expenses can have a significant impact on the difference between success and failure in the retirement years. If inflation and taxes don’t derail your plan, the fact is that many seniors begin to see more doctors over time, and the impact of these additional costs can have a serious impact on retirement savings.

But there are simple ways to cut expenses. Consider taking an audit of all of your current expenditures to begin eliminating any wasteful spending. For one month write down and analyze all your purchases and regular payments. Then begin to look for the free or lower cost alternatives to the things that you may currently be buying. If you start eliminating unnecessary expenses before you retire, you will be able to get into the habit, and that will help you even be able to sock away more into your nest egg.

Here are just a few suggestions on ways to lower your expenses: 

  •  Use the library. Read newspapers & magazines there, instead of receiving home delivery. Save on rentals and downloads by checking out movies, books or music. Cuyahoga County Library now allows you 3 weeks for most materials and you can check out up to 50 items at a time. You can even request items online and they will email you a notice when they are available so you can pick them up at your convenience. The library even offers a limited number of free e-books for download to your Kindle or other e-Reader.
  • Pack a picnic. Pack your lunch, snacks and beverages when you go out for the day. This not only helps you save on the expense of food, but also helps you control your portions and calories.
  • Look for free entertainment. Many local organizations and groups offer an array of free entertainment, such as band concerts in the park, music events at senior centers, events through the libraries, book clubs, bridge groups and other ongoing community clubs & events.
  • Buy previously-owned. Take time to research the cost of cars, appliances, clothes, furniture, etc. You can save dramatically by shopping at garage sales, resale shops, Craigslist, eBay or by bartering.
  • Use coupons. There is a lot of money to be saved by getting into the habit of using coupons. Watch the weekly circulars or sign up for emails from websites like moneysavingmom.com, who do the work for you. You don’t have to go to extremes, but even the smallest effort can reap significant savings over time.
  • Review and update your retirement plan often (or develop one if you don’t have one). Whether you have a plan and would like a second opinion or don’t have a plan and need to create one, it’s important to meet with a financial advisor see if you are on track and to help determine what you can live on during retirement.

Following all of these can help you reduce expenses, gain some confidence and increase the probability of financial independence in retirement.

 

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