Don't Wait Until your Retirement Age.


KEY POINTS

Many people are forced to downsize their lifestyles once they retire.

If you expect your income to shrink significantly, start making changes ahead of retirement to ease that adjustment.

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Make those adjustments much sooner so retirement isn't a total shock to your system.

It's not uncommon to have to cut back on spending once you retire. In fact, many people actively plan to slash their spending substantially once their senior years roll around.

Often, these changes aren't so much desired as they are necessary. A lot of people come into retirement without much money in savings and become heavily reliant on Social Security to cover their bills. But Social Security only replaces about 40% of pre-retirement income for average earners, so those with little savings are often forced to make big changes to compensate.


If you fully expect to have to implement lifestyle changes in retirement, then the time to start working on those is the years leading up to your workforce exit. If you wait until retirement to make big changes, you may end up sorely unhappy.


It's all about easing in

Many financial experts advise easing into retirement by cutting back on working hours rather than going from full-time work to none at all. Now this isn't always possible or feasible, and some careers lend to part-time work better than others. But just as it's a good idea to ease into retirement from a work perspective, so too is it wise to ease into retirement from a spending perspective.


Retirement can be a tough enough adjustment as it is. You're no longer working, which means you no longer have a structured routine, and you may find that you miss the company of having your colleagues around. Add in major financial changes, and it really has the potential to throw you for a loop.


On the other hand, if you start making spending changes ahead of retirement, you may have an easier time getting used to a less expensive lifestyle. That way, retirement doesn't constitute such a major shock.


And also, cutting back on spending in the years leading up to retirement could make it possible to boost your nest egg. If you have a $90,000 IRA, for example, you might retire with $110,000 instead if you spend the three years leading up to retirement spending a lot less. And that extra money in savings could bail you out if a surprise bill arises once your career has ended.


Get Started Now

Take things one step at a time

Some retirees are forced to downsize their homes, unload a car, and make other such major changes to account for their lower income. So it may be a better bet to make those changes one at a time.

Start by downsizing from a two-car household to a single c


ar and get used to that. Then, look at smaller homes. From there, you can also adjust other habits, like dining out, that your retirement income may not allow for so much.