Many retirees are married and have two Social Security checks coming in during retirement. This can make it easier to maintain a comfortable lifestyle after exiting the workforce. But if you’re single or married with a dependent spouse, you can still enjoy your golden years while living on a smaller nest egg. Here are our best tips for how to retire well on a single income.
Save as Much as You Can
Since you won’t have two Social Security checks, it’s important to save as much as you can while you’re still working. Experts suggest single income households set aside at least 15% of their pay for retirement. You can try saving via an app that makes you save like Digit.
If you’re 50 or older and don’t have much of a nest egg yet, try to take advantage of catch-up contributions. In 2021, you can put an extra $6,500 in your 401K and an additional $1,000 in your IRA.
Keep a Big Cash Buffer
Another tip for how to retire well on a single income is to keep a big cash buffer on hand for emergencies. Since you’re living on one income, your budget probably doesn’t have a lot of wiggle room for unexpected expenses. That’s why it’s a good idea to have a large emergency fund so you aren’t forced to take on debt if your car or furnace breaks down.
It’s usually recommended that single income households keep between nine and twelve months of living expenses in a savings account. Before you retire, you may want to increase your emergency fund to two years of expenses. That way you won’t have to sell your investments at a discount if there’s a recession.
Reduce Your Car Payment (Or Go Car-Free)
Your car payment is likely one of your biggest monthly expenses. On average, Americans spend between $376 and $503 per month paying off their auto loans. Studies have shown that many people also upgrade their vehicles shortly after paying off their old one. Constantly having a car payment puts a huge drain on their budget.
If you’re single and don’t have children, it may be easier for you to go without a vehicle and take public transportation to reduce your expenses. The money you save on gas and insurance can be invested to give you a bigger nest egg in retirement. If you continue to go without a car after you stop working, you’ll also need significantly less money to live on, which will help your savings go further.
But if you live in the suburbs and need a car to get around, try to purchase affordable used cars in cash. Foregoing a car payment will enable you to put more money into your 401K and live on a smaller retirement nest egg.
Live with Roommates
The cost of rent rises by 3% to 5% every year, which can make it hard to afford housing on a single income. Even if you own a home, the cost of shouldering a mortgage may prevent you from enjoying your golden years.
Luckily living with roommates can reduce your monthly housing payment so you have more room in your budget for fun. One out of every five seniors lives with a roommate to save money, so you’ll be in good company. You can find other retirees to bunk with by searching on websites like Roommates 4 Boomers, Silvernest, and Senior Homeshares.
Living on a single income can make it harder to save for retirement and enjoy your golden years once you quit your job for good. But luckily making a few tweaks to your lifestyle and financial plans can help you invest more and stretch your nest egg further.
What are your tips for how to retire well on a single income? Let us know in the comments section below!
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