Most people I talk to about retirement are primarily concerned with retirement income, and justifiably so, since many want to retire in the near future. I believe that we get too focused on the income aspect of retirement versus the expenses side of retirement. If you want flexibility in retirement, you first need to gain control of your expenses before worrying about your income.

Why worry about retirement expenses?

The more control you have over your expenses, the higher your odds are of having a successful retirement. Once you retire, you lose control of your income, but you do have some control over your expenses. The lower you keep your expenses, the more flexibility and freedom you will have in retirement.

Retirement is about choices

Most people don’t have to retire, but instead choose to. The amount of money you spend in retirement is also a choice. Some people want to travel while others are content spending time with grandkids and volunteering locally.

What will you spend your time doing in retirement? If you have a large travel and entertainment budget, are you willing to reduce it, if need be? Having the ability and discipline to reduce your expenses can increase the likelihood of your money lasting. Here are some ideas that can help you reduce expenses in retirement.

• Prepare early and eliminate debt. If you want to reduce your retirement expenses, you will need to start planning early. One of the best ways to reduce expenses is to be debt free when you go into retirement. To make it really simple, pay off all of your debt by your retirement date!
• Start retirement with vehicles you plan to keep for 5-10 years. Vehicles are a big expense for many households. Driving a vehicle for an extended period of time versus trading it in every couple years can help reduce expenses.
• Have a large emergency fund. Having a large emergency fund can help eliminate interest expenses. Instead of having to borrow money to replace a roof, or car, you can draw from your emergency fund.
• Make sure all home repairs are done before retiring. When was the last time your roof was replaced? It’s easy to blow up a good retirement plan by replacing a new roof, HVAC system and other home maintenance issues in the first year of retirement.
• Downsize your home or move to a lower cost of living region. The largest expense on most people’s budget is their home. Homeowners have taxes, maintenance, mortgage, and insurance to pay every year. These expenses can be reduced by planning ahead, and reduced even further by moving to a lower cost of living region. The state of Illinois has the highest real estate taxes in the nation; if you live in Chicago, you likely have a high cost of living as well. Moving out of the city of Chicago, or to another state, could easily reduce your cost of living by $10,000 a year or more.
• Eliminate unnecessary expenses from your budget. We always come back to the B word! Evaluate your budget and look for expenses that can be eliminated, such as a $200 monthly house cleaning bill.
• Travel in the off-season. I would guess that 8 out of 10 people I talk to want to travel more in retirement. When you travel can make a huge cost difference. Traveling in the off-season can provide significant savings.
• Stay healthy. Healthcare becomes a larger expense as we age. One thing that can help reduce healthcare costs is to stay healthy. A good diet and regular exercise can help reduce current and future expenses on healthcare.

Retirement is just as much about expenses as it is income. The start of retirement planning should be an analysis of your monthly expenses, and then move on to income. Our retirement planning for federal employees involves analysis of both expenses and income. An objective opinion on your budget could lead to areas where you can cut expenses. If you would like help with your financial planning from a fee-only planner that specializes in working with federal employees, shoot me an email or schedule an introductory call.

Brad Bobb, CFP® is the owner of Bobb Financial Inc, and an expert in retirement planning for federal employees.