Many people focus on investment returns and how much money they will have when they retire. There are countless articles and countless “retirement calculators” to choose from. And with people getting pounded in various media sources about how much they have NOT saved for retirement, and how they will be eating dog food because their health care costs are going to eat all of their savings, we can easily see why people are depressed about this topic.
Because face it, based on typical calculations and projections, a very large chunk of Americans will not have enough for their fantasy retirement.
So what can people do? One thing I argue they do is to put as much energy in keeping living costs lower as they do in trying to boost retirement returns (let’s face it, many people focus TOO much on investment returns, often trying to squeeze more retirement money out of a small monthly savings plan, when they should be SAVING MORE). A cost reduction provides many benefits. Here are a few:
- cost reductions are often an after tax savings so any reductions provide $1 for $1 increases in retirement disposable income
- cost reductions build in INFLATION ADJUSTMENTS AUTOMATICALLY because there is no cost that inflates every year
- some provide tax credits and benefits and may even make money (think solar electricity)
- And some offer better almost guaranteed rates of return than other investments
Just think – a $150/month electric bill could be eliminated with an investment in solar. I have seen a number of solar conversion analyses that offer a much higher RoR (rate of return) than stocks have given, especially if the tax credit is included. Also, that $150 electric bill could creep up every year as the utility company raises rates. That cost inflation would be eliminated. And that would be $150 back in your pocket monthly.
Other ideas include downsizing to a warmer state (avoiding heating bills), moving to a place with well water (avoid water bills), and moving to lower tax locales (taxes seem to ALWAYS INFLATE). Of course some people don’t want to move but this article is not for stubborn people. It’s for people that want to take action to enjoy a comfortable life without being a slave to bills.
And this doesn’t apply to just retirees. Younger people can make these decisions too. Keeping home size manageable, keeping expenses lower (no big car payments!), and making other small money decisions that add up (groceries, phone bills, luxuries, etc) all contribute.
Here’s another article I wrote outlining some problems in the world and some possible action items to keep costs low