June 1, 2010

What to Do If You Retire Without Enough Savings

Many Americans have not saved enough for retirement or have lost their savings through some form of tragedy or simple investment losses.      If you hit retirement age and find yourself with insufficient savings to support your current lifestyle then you may think that you are stuck choosing between working for the rest of your life or living in poverty.   But there are various lifestyle changes or financial choices that you could make that could help you support yourself during retirement even on a relatively low fixed income.

Get a Roommate

Just because you're over 60 doesn't mean you can't have a roommate.   You might know a single senior citizen who is in a similar situation as yourself who has a fixed income and is having difficulty making ends meet themselves.   If your house has a spare bedroom then having someone move in and pay you a monthly rate to help share the bills would improve the financial situation for both yourself and your new roomie.

Get a Reverse Mortgage

A reverse mortgage isn't a great investment.    A reverse mortgage is a way to help you get by, not a way to get rich.   If you're in you and your spouse are in your late 60's and have a home owned outright worth $250,000 then you could get a reverse mortgage that would pay you about $700 per month. You can use the reverse mortgage AARP calculator to get a quick estimate of what kind of income you can get with a reverse mortgage.

Sell Your Home And Rent Instead

A home can also be fairly expensive to maintain on a fixed income.  If you have a home worth $200,000 then you might be facing a $2000 annual property tax bill $500 insurance bill and $200 a month for your utilities.  Altogether thats nearly $500 a month in expenses.   On the other hand you might be able to get an apartment for $600 with bills of $100.   If you sold your home and moved into the apartment you could buy an annuity that would fully fund your rent and leave you $50,000 to $100,000 left over.

Move Somewhere Cheaper

If you live in a higher cost of living area then you could cut your expenses considerably by moving to a low cost area.  Particularly expensive cities like New York or San Francisco could be virtually impossible to afford for a low fixed income.   Even within individual metropolitan areas moving a few miles can make a significant difference in your housing expenses.

Rent a Room

The opposite of getting a roommate is to rent a room in someone elses home.   In most places you can rent a room with utilities included for a few hundred dollars.  This should be cheaper then renting your own home and paying the utilities yourself.  You might be able to find a room in a nice house in a nice neighborhood with people you share common interests with.

Use an Annuity to Spread Out Retirement Savings

Lets say you're 67 years old and you've got $100,000 in the bank today.   The common rule of investing is that you can withdraw 4% of your money and expect it to last forever.   So you could take $4000 a year or $333 out of your account and it should last your life.   If you were to buy an immediate annuity however you'd have guaranteed lifetime insurance with no risk of your money running out.   An annuity would get you around $690 for your life or $550 to cover the life of you and your spouse.  

Live in an RV

Living in an RV or travel trailer can be a relatively inexpensive option.   This can have the added benefit of giving you the option to travel around and see the country.   This isn't necessarily always a very cheap option nor the least expensive way to live.   If this idea interests you then you could do some research to find frugal ways to live in an RV and keep your total expenses low.

Become a Camp Host

If you enjoy the outdoors and like camping then you can volunteer as a camp host and get free camping privileges.    Some parks have volunteer spots and other parks have companies that actually pay you to act as a host.

Join the Peace Corps.

There is no age limit to join the peace corps.   The Peace corps. has a section on older volunteers that says that volunteers well into their 80's have volunteered and continue to serve.

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