Inflation and Retirement: Preserving Your Nest Egg

Is inflation eating into your retirement?  (and what you can do about it)

Inflation is highest it has been for many years.  Shopping for eggs, milk, gasoline, a gallon of paint, and more - brings a reminder of the impact that inflation has had on the cost of daily living.  

Individually, we cannot control inflation.  However, there are two areas that we can control: reducing expenses and increasing income.  Here are some thoughts on both:

TIPS FOR REDUCING EXPENSES

For many retirees - taxes, insurance, food and gasoline, home ownership are probably your highest expenses. 

TAXES: 

Property, income tax, and medical insurance are probably your highest expense.    

Some municipalities and counties offer retirees substantial discounts on their property and vehicle tax.  Several municipalities here in Alaska offer senior property discounts - 20% or more!  Tax on first two vehicles are "tax free".  Does your municipality offer property discount for senior citizens?

Have you sought out a tax professional or use of tax software that identify opportunities, within Tax Code, for income tax reduction?

INSURANCE:  

Bundling home and vehicle insurance can provide substantial reduction in insurance premiums.  Adjusting your insurance deductible can reduce insurance premiums.  Some insurance providers provide "good driver" discounts.  Have you consulted with your insurance carrier regarding ways to reduce your insurance premium?  Have you asked for a discount?

Medicare, Parts A and B are available to those age 65 and older.  In some states, those under age 65 may be eligible for Medicare due to disability or select diseases.  Medicare does not cover all out-of-pocket expenses.  Purchase of a Part C and D, Medicare Advantage and Prescription Drug plan, is also needed.  

Medicare premium is calculated based on your "IRMAA", using your "adjusted gross income" or AGI.  Your Medicare premium is often deducted from your monthly social security check. If you are enrolling for Medicare, important that you enroll within the intial enrollment period. Your seven-month initial enrollment period typically starts three months before the month you turn 65 and ends three months after. If you miss that deadline, you may end up paying more.​ 

TIPS FOR REDUCING LIVING EXPENSE

Shopping food (and other item) sales.  Ask for Senior Discounts.  

In lieu of hiring out home maintenance, consider doing maintenance yourself or "trading services".  Recently, a homeowner requested a bid to paint the upper trim of the home.  The bid came back at $1900 for 1/2 days' work!!  ($450/hr!).  Instead, the homeowner purchased a 30 ft extension pole ($40), multiple angle paint brush extender ($20), painting accessories ($20) plus a gallon of paint ($40) and completed the job.  $120 and a few hours of work vs. $1900!!

Unless your vehicle is on a warrantee plan, consider using a certified mechanic that works from his home.  This avoids the overhead of a shop. 

Purchase plane fares during the "low season" when fares are dramatically reduced.  Consider using TURO in lieu of a rental car agency.  Does your personal vehicle insurance carrier also include full coverage for car rentals (including rental days)?

Reduce home heating/cooling cost by using a programmable thermostat.  Reduce furnace/air conditioner run time when you are away. Program your thermostat so heating occurs during the day with reduced temperature at night when sleepng.  

INCREASING YOUR INCOME  

This is covered in a separate blog. 

                                                    Photo: L. McCallister.  Girdwood, AK

FOR ADDITIONAL READING:

Lowering Insurance Premiums

5 ways to lower insurance premiums.  5 ways to lower insurance premiums | LGFCU

Medicare and Medicare Advantage - know the basics.  AARP.  Step-by-Step Guide to Initial Enrollment (aarp.org)

How does Medicare Calculate your Premium.  How Does Medicare Calculate My Premium? | Medicare & Medicare Advantage Info, Help and Enrollment

Medicare Parts A&B Premiums and Deductibles/Medicare Part D... Fact Sheet.  CMS.gov.  2022 Medicare Parts A & B Premiums and Deductibles/2022 Medicare Part D Income-Related Monthly Adjustment Amounts | CMS

2023 Medicare Cost Fact Sheet.  Medicare.gov.  2023 Medicare costs.

Reducing Cost of Living

Cost of Living for Retirees.  Cost of Living for Retirees | Components & Reduction Strategies (financestrategists.com)

Taxes in Retirement

Taxes in Retirement: How All 50 States Tax Retirees. Find out how income taxes in retirement stack up in all 50 states plus the District of Columbia. Kiplinger.  Taxes in Retirement: How All 50 States Tax Retirees | Kiplinger

Cutting Costs

6 Ways to Cut Costs in Retirement.  How to Cut Costs in Retirement | Retirement | U.S. News (usnews.com)

YOUR REFLECTIONS

Example(s) of simple but effective ways to cut costs?