10 Ideas To Retire On Less (Reprint)

In “Determine Your Retirement Needs In 3 Easy Steps,” I demonstrated a way to estimate retirement savings need. When I discussed this with my wife, she asked, “what if we don’t save enough?” After giving it some thought, here are some ideas on how to retire with less money.

1. Adjust your lifestyle now — If you know you won’t have enough money, you have to make changes now: be frugal, reduce your bills, save more, learn to invest. Start today…don’t wait.
2. Learn about passive income – The only way to stop working is to have more passive income than living expenses. Learn about different ways to make money other than your day job, and start to build, diversify, and shift your income streams. Here are some actual examples of alternative and passive income streams.
3. Collect everything you’ve earned — In addition to the obvious, like Social Security and your retirement savings, there are other hidden sources of income:
   • Call your former employers to see if they owe you any pension payments
   • Check your life insurance policy. If you have whole life insurance, you probably have some cash value in the policy that you might be able to leverage.
4. Stay in your job longer – Assuming you have alternative income, but it isn’t enough yet, consider delaying your retirement. There are several advantages with this option:
   • You don’t have to tap into your retirement savings right away, allowing your investment to keep growing
   • Your retirement money doesn’t have to stretch as far
   • You can continue to contribute to your retirement savings
   • You can enjoy greater Social Security benefits. For example, my parents will be 66 in 4 years. If they start taking Social Security benefits now at 62, they will only get 75% benefits. However, they could wait until 66 to get 100% benefits, or 70 to get 132% benefits.
5. Supplement your income – Many people continue to work in retirement. They tend to do something that pays less than what they used to earn, but the job is often more enjoyable and rewarding. Options include side businesses, seasonal employment, and part-time jobs.
6. Move to a cheaper part of the country — Good weather is not the only reason to move. For example, this cost of living index shows that Memphis, TN, El Paso, TX, Topeka, KS, Oklahoma City, OK, and Springfield, IL are some of the cheapest place to live. Of course you have to take other factors into consideration, like friends, family, health care, and neighborhoods. Take a look at CNN Money for the best places to retire in the U.S. and Sperling’s BestPlaces for more ideas.
7. Retire abroad — This is definitely not for everyone. It requires a lot of research and preparation. But for some people this is a desirable option. For instance, if my wife and I decide to retire in Thailand, we could probably live on one fourth of what we would need to retire here in the U.S. Here are some good articles about retiring abroad:
   • Deciding to retire abroad @ Bankrate.com
   • Retire like royalty in a low-cost paradise @ MSN Money
   • Tiny Nestegg? Retire abroad! @ Wise Bread
8. Find a roommate — This option is not just for the young crowd. If moving from the neighborhood you’ve lived in your entire lifetime is not your cup of tea, you can lower your expenses and supplement your income by sharing your home or apartment with a roommate.
9. Sell your home and rent — I discovered this idea from Millionaire Mommy Next Door’s “Renting beats owning, even in retirement; even if your mortgage is paid off. Here’s why.” At first, I didn’t believe it, but after some analysis it could work in certain circumstances; particularly if there is a lot of equity in your home and rent payments are relatively low. There are many variables to consider, of course, and it requires disciplined investing; therefore, this option is not right for everyone.
10. Move in with your child — I know this is very uncommon in the U.S., but this is a standard practice in many countries. As long as everyone can agree to live together, this is a practical way for elderly parents to retire on less. This works better if the arrangement is mutually beneficial to both parties. Here is an article that discusses preparing to live together with elderly parents.

Do you have another idea not listed here? Please do share!

This post was featured in:

• The Festival of Frugality #116 - Great Designs hosted by Green Panda Treehouse. For more information please visit the Festival of Frugality.

This was a guest post I wrote for Millionaire Mommy Next Door on December 19, 2007.