Cutting Spending as Important as Boosting Income for Retirees

Whether you are retired now or contemplating retiring within the next few years, there are several steps you can take now that can make your retirement budget bigger.

One option for homeowners age 62 and older is a reverse mortgage, which can pay you a lump sum to pay off debts or to invest; or add a monthly stream of income to ease your cash flow. Reverse mortgage lenders can provide you with cost comparisons and guidelines to help you decide if this loan product works with your financial plans.

Reverse mortgage loans are repaid with the equity in your home, so while you live there you can benefit by boosting your income. You can use the funds for anything you want, including bill-paying, home improvements, or even a vacation.

A recent article on SmartMoney.com offered some other suggestions to reduce your spending and allow you to build retirement savings or to avoid taking a job once you retire.

• Move down instead of up. Some advisors suggest moving to a smaller or less expensive home in order to reduce your costs. You can also opt to invest your profits in a retirement savings account. New homeowners who make a big down payment can recoup some of that investment with a reverse mortgage that can be completed at the same time as the home purchase. Talk to a reverse mortgage lender to see how this can work for you.
• Consider your taxes. If you choose to move, be sure to think about moving to a state with lower (or no) income taxes and lower property taxes.
• Reduce expensive debts. Focus on eliminating your debt with high interest rates such as credit cards or payday loans by paying extra each month or using a reverse mortgage to pay them off completely.
• Invest your savings. Keep only about six months of income on hand in an easily accessible savings account; invest the rest of your funds to gain a higher return.
• Make retirement your priority. While paying for college or helping kids with other financial needs is generous, make sure you are funding your retirement first.
• Plan for change. Create a savings account for college tuition for your kids but keep it in your name; you never know when you might need it or they might get a full scholarship.
• Keep investment fees low. Check to make sure you are not overspending in fees for investment accounts.

Making a few of these spending changes can make a difference in how ready you are for retirement.