By YourLifeChoices founder Kaye Fallick
There’s a popular (maybe even cliched) view of retirement as ‘the golden years’. That time of life with few problems, lots of travel, happy gatherings and special time with grandkids.
As with all cliches, this carries elements of truth.
But ask most retirees and they will not see themselves in this picture.
Which makes me think that retirement, for many Australians, is best understood as the swan, sailing serenely on the surface of the water, but underneath, paddling furiously to stay afloat.
This image can be useful in thinking about money in retirement. People think life is cruisy once you’ve left full-time work and are on a retirement income. But most retirement incomes allow for a reasonable lifestyle, rather than an affluent one. This is borne out by the data, which shows that of the 4.3 million Australians aged 65 or over:
- 63% receive a full or part-Age Pension
- 37% start retirement self-funded, and this reduces to just 20% by the time people reach their 80s
Some retirees, like the serene swan, seem to have no money issues whatsoever. They are the affluent 20% who don’t need to watch every penny.
Those on a full or even a part-age Pension are likely to be able to cover essential household expenses, but live fairly frugal lives otherwise, with holidays and special occasions few and far between.
Whichever group you belong to, the difference between work income and retirement income is that, while still working, you have a reasonable chance of covering any losses.
In retirement, you are on a fixed amount, with fewer opportunities to significantly increase this income.
So, is it even possible to budget?
Yes, of course it is.
Here are some ways to get started.
Your outgoings
First, start with a typical monthly bank statement that covers all outgoings, including credit card and debit card expenses, plus any cash payments you may have made. Next, categorise this spending into one of the following five types:
- Accommodation – rent, mortgage, or nil if your home is fully owned
- Essential household – transport, utilities, internet, food, maintenance, basic clothing
- Health – insurance, medical bills, pharmaceuticals
- Helping others – Gifts and donations
- Fun and entertainment – outings, movies, books, fashion, grooming, holidays, etc
Now you have a clearer idea of how much you are spending on the essentials compared with the discretionary expenditure on things you enjoy, rather than need.
Of course, you have no choice but to cover essentials, but you can compare and shop around to reduce these costs on items such as mortgage interest, power, supermarket purchases and so on.
The very nature of discretionary spending means that you can reduce or drop consumption of these items. Yes, that may be painful if, say, you are a movie-lover and the idea of not going to the cinema is really disappointing. But some things matter more than others, and reducing consumption in some categories, rather than removing it entirely, can save a lot of money.
Here are the five main areas of retirement spending and ways to save for you to consider:
- Food
Make a concerted effort to stop throwing food out because it has reached its use-by date.
Consider buying smaller, even if more expensive, portions. If you use everything you purchase, you will be well ahead.
Celebrate Friday with a delicious vegetable soup, which happens to include unused veggies which would otherwise be tossed.
Limit takeaway meals—in many cases, you are also now paying for the food transport.
Consider growing your own herbs and some vegetables—buying parsley and spinach every week makes little sense.
And DO compare prices across Coles, Woolies and ALDI—shop where you can save the most—even if there is a $10 saving, this amounts to more than $500 per year.
- Health
If you have private health insurance, make sure you compare the cost every year* before renewing.
If you don’t wish to change providers, why not phone your insurer and plead your case for a smaller increase? It doesn’t always work, but sometimes it does!
Use Pension Concession Cards or Commonwealth Seniors Health Cards to ensure your pharmaceutical bills are as low as possible.
Check out any fees for scripts and negotiate if they seem too high.
Keep across government health websites so you are up to date on vaccinations – and not paying where you don’t have to (as is the case with flu shots and Shingles injections for older Australians).
- Transport
Use of the above-mentioned concession cards often means cheaper public transport costs, as do state-based seniors cards. Some states offer free transport for older citizens, others free tickets on certain days—again checking the relevant state-based websites will ensure you know your entitlements.
Use an App such as PetrolSpy to check for the lowest fuel prices. And wait to fill your tank on the days prices are lowest, rather than long weekends.
- Travel
For overnight or longer trips, rather than just booking on an aggregator website such as Booking.com or Webjet, check the hotel’s own website to see if they are offering seniors discounts.
Whether they are or not, contact the accommodation provider directly (with the aggregator rate in front of you) and see if you can negotiate a lower rate by dealing with the owner. It often works as these hotels can pay about 17% of the nightly rate to the booking engine – so they may offer you a 10% discount instead. Going direct can pay rich rewards.
Consider also travelling midweek, which is when bookings can be lower and deals are there to be had.
- Entertainment
Again, being a ‘joiner’ makes sense. Culture lovers will enjoy extra access by joining their gallery of choice, and movie lovers will usually get great senior deals by joining Hoyts, Palace, or similar chains. Cinemas also often host ‘low-cost’ movies on mid-week.
Trimming the number of streaming services you subscribe to makes sense, but retaining one or two means relatively low-cost entertainment at home, on tap!
And one last thing
Don’t forget the many senior discounts resources that can be used, like this discount directory here.
