Retire Cheaply and Still Enjoy Your Life With These 18 Tips

If you’re like most people, you look forward to retirement with a mix of excitement and dread, and if you’ve saved little for retirement, the latter can outweigh the former. The experts at Fidelity recommend having 10 times your salary saved by age 67. Since the average U.S. salary was $58,130 in 2021, that means the average 67-year-old should have at least $581,300 socked away. Yet the average retirement savings for people ages 65 to 69 was $206,819 in 2020, so a large majority of people entering or in retirement have little to nothing saved. Here are some strategies you can use to retire cheaply.

Related: How to Jump-Start Your Retirement Savings

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People may have big ideas about what they’ll do in retirement but often find they’re comfortable living a simpler life focused on friends and family “and living life on their own terms, which doesn’t necessarily mean an extravagant lifestyle,” says Rita Assaf, vice president of retirement and college leadership at Fidelity Investments. Fidelity finds that most retirees need to replace between 55% and 80% of their pretax, pre-retirement income to maintain their lifestyle. You might not need as much as you think you do. 

Related: How to Protect Yourself from Financial Ruin in Retirement

Most people are eligible to get Social Security benefits as early as age 62, but the benefits increase if you wait until your full retirement age (usually 67) and rise even more if you delay until 70. “The earlier you retire, the more you will have to rely on savings to meet your income needs, because your Social Security payments will be lower. So, if you can afford to, it can pay to hold off,” Assaf says. 

Related: 12 Reasons NOT to Retire Early

The only way to retire successfully on the cheap is to make a budget and stick to it. “Track what’s going out of your checking and savings accounts to ensure you’re only spending what you really need,” says Julie Prince, founder and CEO of Prince Financial Services, a Northwestern Mutual Private Client Group. Budget before retirement and you can put extra savings toward retirement to help your future self out.

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Another dirt cheap way to retire: geoarbitrage. It’s a fancy term for moving to a lower cost-of-living area. Once you stop working, you don’t have to stay in one place. Moving somewhere with a lower cost of living is one of the best ways to stretch your dollar. Even within the United States, you can save thousands by moving from a high- to low-cost-of-living location. If you want to take it a step further, there are many countries where you can live comfortably on Social Security. 

Why not do things Golden Girls style? “Maintaining a home for just two people — or even one — is quite expensive,” says Kevin Miles, a finance analyst at Loan Advisor. One easy way to share the financial costs and responsibilities of maintaining a household is to live with extended family or old friends. Less loneliness is another benefit. 

Save money and stress by getting involved in the community, where social supports can help stretch your dollar. Neighbors might help you mow your lawn or plow the driveway, and church or social group members might get you to appointments if you can’t manage on your own as you age. 

Related: 49 Fulfilling, Productive Things to Do in Retirement

Even if you’re near retirement age, it is never too late to start saving. In your 50s and 60s you are probably making a much higher salary than when you first started working; socking away some extra money now means being able to retire with a bit more in your accounts. 

Many finance experts recommend working part time in retirement if you don’t have as much saved as you would have liked. Depending on your age, you may still be able to collect your full Social Security benefit. You can then rely on a mix of investments, Social Security, and part-time work to sustain you. It may be something less demanding than your pre-retirement job that brings joy into your life.

Build passive income streams and you can stop working yet still earn money. Although it requires some capital to get started, real estate investing is one of the best ways. “It can be something as simple as renting out a room of your home, or you could purchase an entire property that you rent out either as an Airbnb or long-term rental,” says Jake Hill, CEO of Debt Hammer Debt Consolidation. Real estate investing brings in a lot of income and allows you to escape the 9-to-5 job earlier while providing additional tax benefits.

Day-to-day, must-have expenses in retirement such as housing, food, and health care are best covered by lifetime guaranteed income sources, which include Social Security, pensions, or income annuities, Assaf says. Earmarking Social Security money to cover the essentials will help you live more frugally. “If you can afford to, consider paying nice-to-have, more easily adjusted expenses with your withdrawals from savings, which can be a helpful way to make your savings last longer,” Assaf says.

Take preventative steps before problems grow and become costly. “Instead of buying a new car, you can schedule regular maintenance for your current vehicle. Another example is to focus on exercising daily and eating well to prevent higher medical bills,” says Alex Williams, certified financial planner and CFO of FindThisBest. 

Online marketplaces such as on Facebook or Craigslist can help find high-quality items for a fraction of the price — everything from clothes to furniture to tools can be had secondhand, Williams says. It’s more environmentally conscious, too.

Many retirees believe they can only have Medicare or Medicaid. Not so. If you have a low enough income, you can enroll in Medicaid. Medicare will pay out first; Medicaid will help cover remaining bills. 

When you contribute to a Roth IRA, you don’t get tax deductions as you do with some other investment accounts. “The advantage,” Assaf says, “is you are contributing money that has already been taxed, so any growth or earnings from the investments in the account — and any distributions you take out in retirement — are free from federal taxes and may also be free from state and local taxes with a few conditions.” Another advantage: No required minimum distributions once you turn 72, unlike traditional IRAs, 403(b)s, Roth and traditional 401(k)s, and other employer-sponsored retirement savings plans. RMDs have to be calculated and withdrawn each year and may result in taxable income which leaves less in your pocket in retirement. 

Have a mix of retirement vehicles, because tax diversification can help ensure you have enough for retirement. For example, pretax retirement savings sitting in a 401(k) or a Traditional IRA are typically taxed as ordinary income when you make withdrawals, unlike a Roth. “During retirement, you will be able to take some income out of your plan as taxable and some tax free, thus lowering your tax bracket,” Prince says.

Saving for retirement can be confusing, especially if you’re playing catch-up. A financial adviser can help customize a plan taking into consideration your risk tolerance, longevity, health care costs, and inflation protection. Even if you don’t have a lot of money in your retirement savings, a plan can help you feel more confident in where you stand, Prince says. 

Eliminating debt is important because it means not throwing away money on interest every month. That puts more money in your pocket to make ends meet, and maybe even for a splurge now and then.

Experts often refer to Health Savings Accounts as a triple tax-advantaged account. Money can be invested pretax, grow tax-free, and be withdrawn tax-free for qualifying medical expenses. HSAs are also exempt from required minimum distributions — you don’t have to withdraw money unless you need it. Lowering your tax bill is one of the best ways to retire on less, and an HSA can help you do it.

Related: Reduce Your Health Care Costs With These Expert Tips for Seniors