8 Ways to Cut Costs if You’re Downsizing for Retirement

1. Clarify Your Priorities

Before you look for areas where you can slash expenses from your budget, take some time to consider your personal priorities and what's important to you. How do you want to spend your time in retirement? What things and experiences are essential to you, and what's worth cutting out?

For some, it may be worth being more frugal about spending on food or entertainment at home, cutting out splurges such as pricey bottles of wine and shows in favor of something more cherished, such as trips abroad. For others, splurging on cable and other creature comforts is a priority. The key is to look at not just what you can afford, but what you can do without.

To start, take inventory of what things make you happiest—and what things you may be paying for on autopilot mode, such as memberships and subscriptions or even a frequent coffee takeout habit. Try physically writing down the things that make you happiest. This will make it easier to identify and cut the things that don't.

2. Reduce Your Basic Expenses

The spending you do every day is a big place to look for savings. Here are some ideas for cutting back in staple areas:

• Use coupons and shop sales at the grocery store to shrink your weekly food spending.
• Try asking for senior discounts at restaurants, retailers, movie theaters and hotels.
• Decrease your utility costs by reducing your energy usage, opting for energy-efficient appliances (when it's time to replace them), raising your thermostat in the summer and lowering it in the winter, and negotiating your bills.
• Save on insurance by knowing how much homeowners or renters insurance you need and by comparing auto insurance to find the best deal.

3. Reassess Housing Costs

Housing is the single largest expense in the average household, so looking at your monthly housing expenses for ways to downsize or lower costs can have a big payoff. Whether you're approaching retirement or already retired, consider these strategies for reducing your housing costs:

• Pay off your mortgage. If you have the ability to pay off your mortgage early, doing so can eliminate what may be your biggest expense. Consider working with a financial advisor to determine if it makes sense to liquidate any long-term savings assets to direct toward paying off your mortgage sooner. Be sure to find out if your mortgage charges prepayment penalties first.
• Downsize to a smaller place. Some retirees downsize their homes by moving into a smaller house, a condo or even a tiny home. This can be an especially good option if you have a lot of home equity and selling would allow you to buy a new, smaller home in cash and pocket the difference. Downsizing to a small home can also help you cut back on utility and maintenance costs.

4. Travel Off-Season

If you're planning to spend your retirement finally traveling the world or the United States, save money by booking flights and reservations outside of peak travel times—for most places, that's summer. Plus, you'll get to experience all that popular travel destinations have to offer with fewer crowds.

In addition to traveling off-season, consider other ways to find big travel savings in retirement. Make travel plans well in advance and track flights for at least a few months to find the best deals. Consider subscribing to a discount flight finder to receive lists of the best flight deals to your destinations. In some cases, using a travel credit card for your everyday spending and redeeming points and miles for flights and accommodations can mean big savings too.

5. Lower Medical Care Costs

Medical costs can add up in retirement. Of those who had to delay retirement, 45% cited concerns about rising health care and unexpected medical costs as their reason for putting it off, according to a 2022 survey from financial planning firm Northwestern Mutual.

One of the best ways to save is by doing your best to stay healthy. Improve your overall health and lower the risk of disease by building exercise and healthy eating into your routine. See your doctor for preventive health care measures such as immunizations.

If you're a smoker, quitting can help you greatly reduce the risk of certain health problems, which can help you save on health care expenses—and lower your health and life insurance premiums.

Next, take time to review Medicare plan options. You can enroll in Medicare three months before you turn 65, which is when eligibility starts. There are a few different options for Medicare coverage (called Parts A, B and C) and each have their own benefits. If you need help reviewing your options, you can get free health insurance counseling through the State Health Insurance Assistance Programs (SHIPs).

6. Find Thrifty Hobbies

One great way to cut down costs in retirement is to find hobbies you love to do that don't cost much money: cooking, sewing, arts and crafts, gardening, hiking, birdwatching or anything that you find fun—and cheap. If you can add a social aspect to your hobbies, such as by taking an art class with others or joining a book club, you'll get the added benefit of feeling connected. That can boost your overall physical and mental health.

7. Assess Your Debt

If you're carrying any high-interest debt in the form of credit card balances and loans, make a plan to repay it ASAP. High-interest debt is always a burden on your long-term budget because the longer you spend paying it off, the more you sacrifice to interest charges. That's especially undesirable when you're working with a fixed income. Reducing your debt faster is a big opportunity to save more over time.

For example, consider you have a credit card balance of $5,000 with an interest rate of 15% and a minimum payment of $113. Paying just the minimum payment would mean spending five years paying off the debt and paying an extra $2,326 in interest alone.

8. Sell a Car

If you have two vehicles, consider selling one. You may no longer need two cars for your household when you're not commuting to a job. If you still frequently drive to other places, such as events, appointments and more, you may be able to coordinate with other members of your household to get by with just one vehicle. Selling one of your household's cars can help you save on loan payments, gasoline, maintenance costs and auto insurance. It's not an attractive option for everyone, but could be a good fit for some.

Alternatively, if you live in an area with good walkability and public transportation, you may be able to get around without a car. These energy-efficient transportation options save money and help you stay active too.

Consider Financial Planning

Setting up a retirement budget that works for you, limiting your expenses and ensuring that you have enough income to work with are major steps. If you're worried about running out of money in retirement, or simply want to make sure you're saving and spending the optimal amount for your specific situation, consider reaching out to a financial planner.

Financial planning comes at a cost, but it can be a huge relief to get professional support for managing your money. For example, a financial planner can help you manage your savings, investments and even plan for future giving. They can also help you manage your household finances, decide which savings to tap into for what and help you plan for preserving wealth through market ups and downs.