How to Succesfully Retire on Less

6 Money-Saving Tips That Can Help You Retire with Less Savings

Older couple relaxing together on sofa
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Although many experts imply you can't retire with much less than a million dollars saved, each year many people retire with far less. While, of course, your first choice may still be to get that $1,000,000 or more in the bank, your age and savings to date may dictate that such a goal may not be achievable. Here are some tips to help you retire on far less than the experts claim you need.

Tip 1. Move Somewhere Cheap

If you live in a high-cost area like a big city or affluent suburb, trading down to a lower-cost area could save you a bundle both today and in the long run.

Real estate taxes and home prices tend to be much higher in some parts of the country than in others. Simply moving away from the coasts is another way to save some money, since most of the interior United States are far less costly places to live.

Moving out of the U.S. upon retirement has become increasingly more common as well. You can move to places like Mexico, Costa Rica, and other western hemisphere locales sometimes at a significant cost savings over staying domestic. Your new location might be just a bit sunnier and warmer, too.

Tip 2. Delay Retirement and Receive a Higher Social Security Benefit

By continuing to work, even just part-time, you increase the number of years you have to continue contributing to your retirement accounts (or the amount you need from those accounts) and the number of years those assets have to grow. As a bonus, by delaying filing for Social Security, you increase your Social Security benefit.

While your full retirement age (FRA) varies based on the year you were born, your total benefit amount rises each month you delay until age 70. This increase is also guaranteed, which is something you can't say for the return on most of your investment accounts. Such a delayed retirement means you will not need as much saved when you ultimately decide to stop working.

First, your monthly Social Security benefit check will be bigger than an earlier retirement would have produced. Second, you will have that many years less to spend down your funds.

Tip 3. Pay Off Your House (and Other Debt)

If you get to retirement with no mortgage, one of the largest expenses during your working career - housing - disappears. During your final working years, consider focusing on eliminating all your debt, including your mortgage. It's amazing what you can afford on a fixed income if you don't have that big monthly payment taking a huge chunk of your cash every 30 days. That said, if paying off your mortgage early hinders your ability to save for retirement, you may want to weigh your options fully before proceeding. Not sure if you should try to pay off your mortgage before retirement? Check out our retirement mortgage guide.

Tip 4. Get Rid of Car Payments

By the same logic, unless you're paying cash, don't buy a new car a year before you retire if you don't absolutely need one. Properly maintained, a car can last for many years after your payments cease. To follow this tip successfully, you'll need to buy - not lease - a car and not replace it every three years, as you might have done during your working years.

Sure, you might not get a new toy as often as you once did, but I reckon most people in their seventies would rather drive an 8-year old car than begin a job search to pay for a 2-year old one in retirement.

Tip 5. Be Healthy

Medical expenses can eat up an enormous amount of your retirement savings - even if you're fortunate enough to have good insurance. If you retire before you qualify for Medicare, your previous health will be a major factor in the health insurance rates you pay. While proper eating and exercise habits do not guarantee good health, they do increase your chances of not needing expensive medical procedures. Give yourself the best chance to save some money on future medical expenses by starting healthy habits now. Make sure that you are not in the same boat as those people who lament that they did not take better care of themselves when they were younger.

Tip 6. Have a Pension

Increasingly rare in the private sector, defined benefit pensions remain common for many government workers. The existence of a meaningful pension benefit alters the entire calculation of how much you need to retire, allowing you to stop working with far less money, since you'll receive a pension check every month during retirement. But if your industry and career of choice is one of the many that has moved to the defined contribution plan model (like a 401(k) plan), it might be worth a trip to see a fee-based certified financial planner (CFP) to discuss how you can set up your retirement investments to work like a pension.

While these six tips are a great place to start when you want to be able to retire on less, the best retirement plans include starting to save early and regularly and include consideration for the non-financial keys to a happy retirement.