Tips for Managing Retirement Costs

The U.S. economy may be healthy by most standard measures, but there are still significant challenges for retirees.  Volatile investment markets and rising prices for everything from energy to groceries has understandably strained a lot of retirement budgets.

Inflation is particularly tough on seniors.  It not only triggers higher prices on everyday items that must be purchased by many retirees who are living on fixed incomes, but it has also affected even the conservative bond-heavy investment portfolios typically held by retirees.

“Rising prices are squeezing household budgets around the country and putting additional strain on its 56 million residents age 65 and up, many of whom rely on fixed incomes and limited savings to cover monthly costs for prolonged and unpredictable periods,” said The Washington Post last year.  But its message still rings loud and true months later in 2023.

Many seniors have been looking for ways to reduce their spending.  In fact, 48% of retirees cut costs last year, according to a survey by NewRetirement.com.

The NewRetirement piece proposed a wide range of tips for managing costs in retirement, including these four practical suggestions:

• Have a Plan to Allocate Time and Money

Avoid squandering funds by focusing on what is most important, which is different for each retiree.

• Focus on Priorities

The way money is spent is a reflection on priorities.  Therefore, budget cuts should include purchases and activities that are less critical to a senior’s routine.

• Stay Healthy and Properly Insured

Out-of-pocket healthcare costs can be a huge component of annual spending.  It may be easier said than done, but maintaining a heathy lifestyle with exercise and proper nutrition can reduce this budget item considerably.   In addition, choosing the many coverage options offered by Medicare wisely can be extremely beneficial as well.

• Travel During Less Peak Periods

The ability to travel with less restrictions is another benefit of retirement but traveling during the busiest times of the year can be cost-prohibitive and stressful financially.  Trips during “off peak” months are much more budget friendly.

Following the suggestions above and in the NewRetirement article can significantly impact annual spending in retirement.  But of course, managing expenses is often only part of the solution toward right-sizing a budget.  It may be necessary to explore options for generating revenue as well.

Financial advisors counsel seniors to establish a “cash floor” — a pool of liquid money set aside that can be accessed at any time — in order to support their income needs and reduce vulnerability to cash flow squeezes caused by market volatility, inflationary spikes or unexpected expenses. 

With this advice at the forefront of their minds, many seniors are thankfully discovering a proven strategy that is frequently overlooked.

If a life insurance policy is no longer needed, affordable or serving its original purpose, then it can be sold just like a car, home or any other asset or possession.  There is a highly regulated market – the secondary market for life insurance - to facilitate such a sale through a transaction called a life settlement.

A life settlement enables qualified policy owners to sell their coverage to licensed financial entities in exchange for a lump sum cash payment.  The life settlement industry has paid billions of dollars to consumers and, according to one U.S. Government Accountability Office study, sellers received four to eight times more money than the cash surrender values offered from life insurance carriers.

The funds obtained from the sale of a life insurance policy can be used however the retiree desires, including to offset expensive health care bills, provide gifts to family members or charities or to help pay for retirement expenses.   A life settlement can help establish that coveted cash floor, relieve financial pressure and assist seniors with managing their retirement costs. 

For more information or to receive a free life insurance policy appraisal, then please visit www.welcomefunds.com or call 877.227.4484.