Retirement is supposed to be a time to kick back and relax. Yet, according to a study conducted by the Employee Benefit Research Institute, more retirees are unsatisfied with their retirement than ever before. In 1998, some 60 percent of retirees described their retirements as "very satisfying" — but in 2012, that number fell below 50 percent.
Some seniors are turning to another way of increasing their retirement satisfaction: financial peace. By utilizing financial prudence in their everyday lives, retirees increase their chances of weathering financial storms, including potential problems in the stock market. Here are some ways seniors can enjoy retirement without overspending.
1. Eliminate Debts — Especially Mortgages
According to a study in the Economic Journal, having problems repaying debt can lead to worse psychological health. That's no way to spend one's golden years. Eliminating debts — especially the big debts — leaves more money available for enjoying retirement. Those nearing retirement age should focus on major-ticket items, including the following.
- Downsize your home. Reducing or eliminating the debt owed on a mortgage may require downsizing. That could mean moving from a family-sized estate to a condominium, for example. This reduces the weight of a mortgage on your retirement and makes it possible to live with a lot less maintenance costs, which in turn reduces physical stress.
- Clear out unnecessary debts and monthly expenses. When no longer working, is it vital to have two full vehicles for traveling? If you have a car payment on one of them, you might want to reconsider. Similarly, cut out monthly expenses that you're no longer using. Has it been six months since your last gym visit? It may be time to take a second look at your budget.
Generally, there are two methods for getting out of debt. With the snowball method, you'll pay off the smallest debt first and move up to the largest. The avalanche method focuses on paying off the debt with the highest interest first. Do whichever makes you more comfortable.
2. Don't Pay Extra Fees or Miss Retirement Deadlines
Sometimes saving money is simply about keeping yourself in the game—and not messing up when there are deadlines that can result in you having less money than you planned. Focus on the key ages of retirement planning so you never make a mistake that results in more taxes, penalties or fees.
Ideally, you should already have a plan in place before retiring, including a calendar of all the relevant dates. But even if you haven't put that together already, there's no time like the present. Prioritize deadlines like retirement account withdrawals.
3. Prioritize Your Spending
Balancing enjoyment with frugality can be one of the major challenges for retired life. You want to be frugal because, after all, who wouldn't want financial peace? On the other hand, you've worked hard to get to this point—and this is the time in your life when you shouldn't feel bad about enjoying your success.
How do you achieve a balance here? By doing a little bit of both. It's fine to spend— as long as you prioritize the spending. Spend money on the things you know will truly add to your retirement enjoyment, and be wary of those big-ticket novelty items that might not bring so much joy in the long run.
The most obvious way to accomplish this is to continue using a monthly budget through retirement. This is a great way to organize your major expenses—as well as identify when you have enough money left over for relaxation, travel and general enjoyment.
4. Use Credit Card Points
Retirement spending means maintaining those expenses to which you're already accustomed: groceries, gasoline, and so on. It won't be any different after you're retired. That's why it's a good idea to think about the rewards you might get for your regular expenses. Credit card rewards in the form of cash back and points can go a long way to saving you money on your next cruise or trip overseas.
The key here is understanding which area of your life would benefit most from using credit card points. You should also apply for a credit card that you'll use regularly. For example, a credit card that rewards you for making frequent grocery trips to a particular store can be highly rewarding if you already visit that store in the first place.
By leveraging points on money you would have spent anyway, you can save a significant amount on travel or retirement expenses and enjoy retirement without going into overspending. This will increase satisfaction and ensure that your retirement lifestyle remains sustainable.
Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.