Downsizing in retirement seems like a smart move to save money. But, there are some caveats that retirees might not think of before they make the move.
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Some retirees who have downsized are encountering costs they didn’t budget for a few years back. GOBankingRates spoke to retirees to find out what they wish they knew before they downsized.
Account for Inflation
A lot of retirees base how much they’ll need on the price of goods and services when they retire. Even if they downsize, this can still cause a discrepancy in the budget in a few years time.
Stephanie H. retired at the age of 59 in March 2022. She said she wished she had budgeted in a way that left room for prices to rise.
“I didn’t figure in how much the cost of everything would increase. My house insurance doubled. My car insurance went up more than 80%,” she said.
Stephanie also noted that her cell phone bill, health insurance, gym membership and groceries also went up. “I was blessed with a pension, however it will never increase,” the retiree added.
Stephanie recommended that retirees really take stock of their expenses before they downsize.
“Look at your expenses, write down every expense,” she explained. “Are there things where you can change services? Cut down? Cut out? Do it yourself vs paying someone? Are there things you don’t use that you can sell (you’d be surprised) and put that money directly in savings?”
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Look for Lower Rates
As Stephanie pointed out, insurance prices — whether it be health insurance, car insurance, pet insurance or any other type — are sure to rise during the retirement years.
Ivy S. recommended being diligent about looking into lower rates for insurance.
“I’m glad I changed my car insurance and saved $350 over six months,” she shared.
Ivy also switched her phone service so she could save more money.
Think About Long-Term Care
Depending on health, some retirees might need long-term care as soon as they stop working. Even if that’s not the case, it’s an important need to think about.
Ivy remarked that long-term care was something her initial retirement plans didn’t budget for. “I don’t need it yet, but I wish I had long-term care,” she said.
It might be wise to save enough money that some can be applied to more extensive care in the future.
Look for Grocery Stores With Lower Prices
One way to save more money is to switch grocery stores. Some stores like Whole Foods and Gelson’s are known for having higher prices than others.
Ivy said one thing that saved her money when she downsized was knowing it was time to go to a different grocery store for her essentials. “I shop at Aldi’s to save money on food and wine,” she noted.
Make Money Work for You
Ivy used to keep money in a no-interest checking account. Once she downsized in retirement, she moved her money to a seven month certificate of deposit that paid a 4.41% interest rate. This allowed her to accrue even more money without having to do a thing.
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This article originally appeared on GOBankingRates.com: I Downsized in Retirement: Here’s What You Should Know Before Doing It
