Pretty much everyone looks forward to the day when they can leave the long commutes, demanding bosses, and all the hassles of the working world behind. Retirement provides people with the opportunity to enjoy the fruits of their labor, allowing them the free time to travel the world, reconnect with family and friends, take up hobbies they’ve long since left by the wayside (or try out new ones), and perhaps even open their own small business, if they are so inclined. However, many retirees live on a fixed budget dictated by their retirement accounts, which means they may have to plan carefully in order to maintain a comfortable lifestyle. And since the annual income received after retirement is nearly always less than what the average person earned from a job, downsizing is a necessity. But it doesn’t have to be like pulling teeth; there are plenty of ways to simplify when you retire so that you can live within your means.
You can start by taking a look at your car. You might have had to keep a gas-guzzling vehicle during your working years because electric cars simply didn’t have the range to complete your daily commute. But if you’ve driven it into the ground and it’s on its last legs, perhaps now is the time to consider how you can do your part for the environment and save some dough in the meantime by choosing an automobile that has a shorter range, but eschews pricy petroleum products. Although these options can be expensive up front, there are still some government rebates in place pertaining to fully electric and plug-in hybrid vehicles. And considering that the cost of “fueling” these vehicles is a fraction of the price of gasoline, the savings should rack up over time. Or if you’re still active and you enjoy temperate climes, you might hop on the old bicycle to get around town, as well.
Of course, for most people the major expenses of living are wrapped up in a home. By the age of retirement many homeowners have paid off their mortgage, leaving them without a large monthly payment. But if you still live in your family home even though the kids have long since left to start their own lives, you could be overpaying for utilities, property tax, insurance, and all manner of expenses that would be lowered by living in a smaller home. Plus, you’re stuck cleaning rooms that only get used when the kids and grandkids come to visit (which is to say, rarely). While there is a certain amount of nostalgia wrapped up in a home, you need to consider the benefits of this opportunity to downsize.
By selling your home you could purchase a smaller place that better suits your needs and end up with some money to spare. Now, you might be worried about the taxes you will have to pay on capital gains from a home sale, but in many cases this money is not taxable (although some exclusions do apply). This is why it poses such an attractive option for many homeowners heading into retirement. But before you start perusing my online estate agent advertise your house on Rightmove, and prepare to move to Belize you might want to consider what you stand to gain or lose by such a strategy. If selling your home entails taking a loss, as is often the case in the current economy, the flipside of the coin is that you cannot deduct it on your taxes. So consider long and hard before you sell off the furniture and put a sign in the yard.