5 Unusual Ways Frugal Retirees Keep Their Monthly Bills Low
When retirees need to save money, they typically reach for sale items or avoid dining out for a bit. And, while those are definitely good moves, there are also some lesser known, unconventional ways to save money in your golden years.
Keep reading for five unusual ways retirees keep their monthly bills low.
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1. They Avoid IRMAA Surcharges
According to Cayden W. McLaughlin, a financial planner at WealthAdvisor365, most retirees don’t know about Income-Related Monthly Adjustment Amounts (IRMAA) until they show up on their Medicare bill. This surcharge raises premiums on Medicare for Parts B and D (sometimes up to hundreds of dollars per month) once your income exceeds a certain threshold.
But because the Social Security Administration (SSA) uses your tax return from two years prior to calculate your current Medicare premiums, it likely reflects a period of time when you were earning more money than you currently are. This is why, in early retirement, frugal retirees stagger Roth conversions, balance withdrawals across account types, utilize health savings accounts (HSAs) and Roth IRAs and time large gains or distributions — tactics that prevent their premiums from rising by avoiding how much the IRS counts as income.
2. They Utilize AARP Benefits and Food Pantries
Annette Harris, owner at Harris Financial Coaching, explained frugal retirees utilize AARP benefits and food pantries not as a last resort, but as part of their monthly strategy to keep costs low. This can be essential on a fixed income.
AARP-related savings include discounts on prescription drugs available at Walgreens, as well as additional savings (like discounted household items) through their free Rx card. Additionally, food pantries and community food programs can help reduce the cost of groceries. Many grocery stores even offer 10% off to seniors 55+.
3. They Move to A Different County or City
“Everyone knows that some states are better than others when it comes to taxes on retirement income, but very few act on the idea that seniors’ homestead property exemptions vary widely within the same state,” said CEO and president of Best Interest Financial, Cody Schuiteboer.
He explained that moving 20 minutes away can actually save retirees $2,000—$4,000 annually in property taxes. All it takes is some research to figure out where the geographic boundaries are.
4. They Utilize Alternative Heating and Cooling Methods
Nothing wrecks a carefully curated budget like receiving a high utilities bill — especially in the very hot and very cold months. This is why, according to Melanie Musson, insurance and finance expert at Clearsurance.com, frugal retirees think outside the box when it comes to keeping their monthly electric costs low.
In the winter months, some wear coats indoors and utilize heating pads to avoid setting the heat too high. They may even wrap their water heaters in an insulation blanket to reduce standby heat loss — a trick that can cut water heating costs by between 7%–16%, according to the U.S. Department of Energy.
In the summer, retirees open windows, wear breathable fabrics, draw the blinds and buy portable fans so the AC doesn’t cost them an arm and a leg. Some even create DIY air conditioners by strategically placing a bowl of ice in front of an oscillating fan.
5. They Make Their Life Insurance Policy Pay Them While They Are Still Alive
Yes, you read that correctly.
Most individuals take out life insurance policies to ensure loved ones are taken care of if or when the policy holder dies. But, hey, life happens. (Pun intended).
When frugal retirees fall on tough times, some actually sell or cash out their life insurance policies in order to eliminate their monthly premiums and collect a nice payout, per Annuity.org. Unfortunately, however, their beneficiaries will no longer be able to receive death benefits.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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