3 reasons your cost of living may be lower in retirement

Lots of financial challenges can arise when you enter your golden years, but here's some good news: You'll probably save money in these areas.

By Credit.com Mar 26, 2014 11:49AM

This post comes from AJ Smith at partner site Credit.com.


Credit.com on MSN MoneyWhether retirement is a distant dream or fast approaching, planning now can help. One of the first steps in planning is thinking about what kind of retirement you desire. Do you anticipate taking on a second career or pursuing part-time work? Do you hope to travel extensively or start expensive hobbies? Will you downsize your home, move to another state or even another country? These answers will ultimately help you decide how much income you need in retirement and thus how much you need to save.


Smiling older man driving convertible © Clerkenwell, the Agency Collection, Getty ImagesWill your income needs stay the same, decrease or increase in retirement? The answer will be different for everyone but here are three ways your cost of living may decrease in retirement.


1. No mortgage

If you make it a goal to  pay off your mortgage pprior to retirement, you can cut the cost of your mortgage from your monthly budget. This can free up cash that you can put toward other things or just reduce how much you need to pull from your savings.


This can also lower your costs in other areas. Without a mortgage to cover, you may be able to reduce your insurance coverage. One of the main factors to consider in purchasing life insurance, is to help cover your debts upon your death. But if you have removed this monthly payment, your spouse or significant other may not need as much to cover costs. It’s a good idea to re-asses how much life insurance you need after big life events like starting a family, buying a house or retirement.


2. Work bills

Having a job means you earn money, but it can also cost money to work. When you retire, you no longer have to worry about commuting costs, work clothes and other expenses. If you used your car for getting to and from work, you may now pay less on gas, maintenance and car insurance.


In addition, many people dine out a lot while they are in the working world. Sometimes this is to grab lunch or because you are too exhausted to cook dinner. Now you may be able to reduce your food bills by cooking your own food and eating more often at home.


3. You’re already there

The nice thing about making it to retirement is you can stop preparing for it! So while a large part of your budget during your working years likely went to building up a retirement nest egg, once you retire, you can stop building. If you have been maxing out contributions to your retirement accounts in recent years, removing retirement savings from your budget can greatly decrease your cost of living.


More from Credit.com:


VIDEO ON MSN MONEY

68Comments
Mar 27, 2014 12:04AM
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All I can say is: Congress can give 1 billion to Pakistan per year, Spend almost 6 Trillion in Iraq & Afghanistan so far. Companies spend Billions on Lobbyists. Yet, not one decent pay raise for the hourly worker in over 30 years. No raise in minimum wage in 10 years. 1% for Social Security. Cuts for the SNAP  program(food stamps). Cuts in the Head Start program. Cuts for the disabled. No raise for retired teachers in 12 years. I believe America's priorities are going to the wrong places. We need to change and take care of the Citizens of America FIRST!


Minimum wage has to be renamed to "Livable Wage". It needs to be raised to enable the person to support themselves without public assistance.

Lobbying has to be outlawed.

Congressional Pay has to be cut by 2/3, and Congress must work 50 weeks within a year.

That will be a good start.

Mar 26, 2014 3:36PM
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Nothing is cheap except poor quality.
Mar 26, 2014 6:41PM
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The previos MSN article  about retirement , out earlier today, stated that costs would be higher in retirement. What a bunch of BS theses endless retirement articles are getting to be- no consistency and  very little credibility. I guess they do generate clicks for advertising revenue and thats why the stream of blather goes on day after day.
Mar 26, 2014 5:25PM
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yesterday it was eating beans, to day it's cheaper retirement.  what next?  how to find the 5 best places under the freeway overpasses?  is the left preparing us for more bad economic news from their beloved Obama, Pelosi, and Reid?
Mar 26, 2014 6:50PM
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Beans and bread lines while our government puts out the welcome mat to every destitute person who wants to immigrate but doesn't want to learn Engli**** obvious that Social Security is not going to afford seniors housing, and yet the government has incorporated the inviolate fund that working people have put their money into all their lives into the general fund and now feels free to hand it out as they see fit.  If the people making these decisions were getting socail security instead of their own (more favorable) retirement, this would not have happened.  Now that SS is tied to this COLA formula, the cost of food, heating oil, and HOUSING is skyrocketing and the feds are claiming the real cost of living is only 1% for 2014.  I know that most people got 30% to 50% increases in rent in my city in just the last two years.  How far did the Social Security increase of a whooping 1% go towards that?  Oh, and I think Medicare took more too, didn't it?  Once Mexico is empty, it will be welcoming to poor Americans.  Already it is on the list of best places to retire.  Mexicans enter the U.S. and get on Welfare and Disability while seniors go south of the border to be able to afford corn and beans.  Maybe we don't need a fence after all.  And another bright spot, there might be a business opportunity:  Shuttling older people south - wheelchairs and oxygen provided while en route.
Mar 26, 2014 4:17PM
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I keep wrestling with having a retirement income that is about 70% of my working income and aspirations for a retirement life that would cost me 125% of my working income.  I've always heard that living expenses are supposed to cheaper when you retire but don't you retire to have more fun than you do while you are working?  In my world, that costs more than getting up and going to work everyday.
Mar 26, 2014 5:52PM
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The only way retirement will be cheaper is if I by a trailer house in Wyoming.  
Mar 26, 2014 4:18PM
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In most cases you usually get what you pay for.  However, in the case of retirement someone else will most likely get a large share of what you paid for via your Social Security, Medicare, and tax payments as the dependency class political handlers need to provide for the lifestyle of their voting block.
Mar 26, 2014 2:43PM
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I find living in the gutter to be pretty cheep. Since they took everything from me, after working my whole life. Its about the only choice I have left.
Mar 26, 2014 8:12PM
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Some people are not concerned about retirement because they rather work, if you are one of those people you are in luck.... with Obama and mob working hard to assure you just that. If they can they will break the bank and any hope you might have of retirement.... Remember most of you got what you wanted when you elected them.....smile
Mar 27, 2014 8:52AM
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all, if you would of started retirement accounts and maybe pull your head out and start a pension you wouldn't be whining , live with in your means and save. it isn't that hard . i have good pensions that I've paid into for years and didn't take the money on the check. and social security is a bonus , stop blaming other people and take responsibility .
Mar 27, 2014 9:15AM
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Next year, I retire!!! Having worked a long and hard 25 years slaving for a city being unappreciated and over-worked, I deserve it after all I had to go through to get it. Changing careers to have a pension was the one of the few good choices I made in my life. But, I certainly paid dearly for that one. I sure hope I live enough years to enjoy every single minute of it too.
Mar 26, 2014 6:38PM
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"Life is like a box of chocolates" as long as they are not Ayds.
Mar 27, 2014 12:11AM
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It all depends on how you plan to live during your retirement. Will you travel? take up expensive hobbies? It may actually cost you more. I just read several good posts on downsizing, frugal living and retiring overseas to stretch you dollars on the retirement site Retirement And Good Living. The site provides good information on many retirement topics.
Mar 27, 2014 11:41AM
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The chief problem when you retire is how to spend a lot of time without spending a lot of money .God Luck.
Mar 27, 2014 1:22PM
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The assumption seems to be that costs will remain pretty stable.  I doubt it.  Cars today sell for more than houses did 30-40 years ago.  The 26-cents a gallon gas is now 3.499.Today's dollar is worth more than tomorrow's buck.  As a former apartment house owner I can remember the fear elderly tenants displayed each time their leases were up.  Never had the heart to pass on some added costs on their lease renewals. I felt that their stable occupancy offset any need for increases. So the younger tenants paid the brunt of added operating costs.  (My private version of social welfare.)  I think those who can continue working in their "golden years" should continue to do so as long as possible.  Aside from the fact that the activity is often beneficial mentally and physically as we age, it delays the cutback in living standards and provides a stronger feeling of independence.
Mar 27, 2014 11:25AM
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This article is in fantasy land. If you have been fortunate to work 20 30 40 years andtraditionally save and contribute towards retirement sure the article works. What about those who have been getting there butts kicked in the economy and have had situations in life that has disrupted or destroyed retirement?
Mar 27, 2014 12:32PM
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I don't think most people realize the costs involved with just going to work, but the old saying is "ya gotta spend money to make money".
Apr 2, 2014 4:08PM
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For those who did buy and now live in the same home, you will have the extra money  each month  if you purchased the home below your means while you were working, and paid off the mortgage as in the above article.  The fallacy of the real estate market is it is geared for you to purchase a higher priced larger home based your aspiration to earn ever increasing wages. 

Most of the pundits years ago recommended highly leveraging purchase of a home.
That is put the least money down and finance the balance at the top end of your affordability at the time, so that you could resell every so often and reap the rewards of ever increasing home prices. Young professionals were advised to buy nearly executive homes assuming that they too would become managers.

Well for the middle class wages have been flat. Those that did not get taken in by the above ideas are far able to retire with the mortgage paid and without downsizing to a smaller home.
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