Market Overview

How will retirement life be different?

The whole idea of retirement is that we come to a place in life where we don’t have to work anymore. By definition, that means we generally don’t generate as much income either.  The trick, then, is to live as well as we can for as long as we can without the income we had while we were working fulltime.

Here are a few tips for living frugally while still maintaining an equivalent lifestyle.

Use your time well

The first piece of advice most prospective retirees get is to stop eating out at restaurants so much. And that just makes sense. The typical American household spends an average of $3,008 per year on dining out, the Bureau of Labor Statistics reports.

While you don’t have as much money as a retiree, you have so much more time. As you become more experienced in the kitchen, you could go from buying a pre-made roast chicken to buying a packaged one to roast yourself. A month later, you could experiment with store-bought sauces and rubs. A month after that, you’ll realize that you can make a better marinade with spices, tomato sauce and a lot less sugar or corn syrup. By next summer, you might even be growing your own basil, oregano and tomatoes.

And when you do decide to go out to eat, remember that you are now the reason why some marketing genius invented the “early bird special”. If you’re willing to have dinner at 6 o’clock rather than 7, you can typically save 20% off your check. But be nice – tip as if you’re paying full freight.

Lighten your footprint

Nothing says success like having a big house. And good for you if you have one.

But what’s it for really; to raise a family or as a symbol of wealth? If you answered the former, consider this: If your kids are grown and have moved out, do you expect them to move back in? You did your job, and so did the house. Let it work its magic for another family. Discuss moving to a smaller house or garden home. Your monthly roof-over-your-head cost will be dramatically lower, and the move might be justified on the reduced utilities alone. For the one or two days a year you wish you had the old homestead, you could rent a B&B and be just as happy with your kids and grandkids around.

Just as your house is probably your biggest monthly expense, your car is almost certainly the second-biggest. Ask yourself how big a car do you really need now that you no longer have to fit an entire lacrosse team in the back.

And while you’re at it, if you’re open to the idea, why not move to some place where it’s cheaper to live? Unless you’re already living in Richmond, Ind., where the cost of living is 21% below the U.S. average according to Kiplinger, there’s probably someplace less expensive to call home.

Get your finances in order

Ultimately, planning for retirement and managing a retirement portfolio is as much about lifestyle risk as it is about investment risks.  Lifestyle risk, which addresses your cost of living plus your cost of comfort, applies to your accumulation years as much as it does your retirement years. That’s because the willingness to save is basically the willingness to sacrifice some lifestyle luxuries today in order to provide lifestyle security in the future.  So let’s look at that often ignored – though sometimes very sensitive – balancing act between living today and saving for tomorrow.

Living off your 401(k) offers you many ways of reducing your tax bill, but it also presents many chances for missteps.  A professional financial advisor can help you control and manage your inflows and outflows. In fact, a client called just the other day to ask for our help in creating a spending plan that worked for him.  Take the guesswork out of maximizing your financial life in retirement. If you’re approaching this milestone, consider reaching out to your investment professional to clarify your next moves, or find one who will. Even before that conversation, though, taking assessments of what you have and what you’ll probably need, and for how long are great first steps.