A lot of Baby Boomers are trimming their budgets as retirement arrives. Vanguard research finds only about 40% of the youngest boomers, those aged 61 to 65, are on track to maintain their current standard of living after they stop working. Even with Social Security and retirement accounts helping, many have already started making small spending adjustments, from clothes and coffee to subscriptions.
A $9,000 Yearly Gap
The typical 61-to-65-year-old is headed for an annual retirement deficit of $9,000, which Vanguard estimates is a 24% shortfall in what they need to fund their lifestyle. That projection assumes people retire and claim Social Security at age 65. It also lands in the middle of what’s called “peak 65,” with more than 4 million Americans, about 11,000 a day, expected to turn 65 each year from 2024 to 2027.
Why Boomers Have Less Room to Maneuver
Part of the squeeze is timing. Pensions were fading, and 401(k)s were taking over just as young boomers hit their peak earning years. They didn’t fully benefit from either, says Kelly Hahn, head of retirement research in Vanguard’s Investment Strategy Group. Gen Z and millennials have decades to change course, perhaps by saving more and earning compound interest on those balances. Near-retirees do not.
Secondhand In, Collectibles Out
With more time to shop, many financially savvy boomers go used or refurbished whenever possible, whether it’s electronics or clothing. Once the office dress code goes, much of the wardrobe could likely come secondhand. Selling works the other way. Years in one home tend to pile up stuff, and vintage toys, retro outfits, jewelry, and older furniture have all been known to sell for serious cash on the resale market.
Discounts and Points
Senior discounts show up at retailers, pharmacies, airlines, and hotels. Kohl’s takes 15% off in-store for shoppers 60 and over every Wednesday, Chili’s gives diners 55 and over 10% off, and some airlines may offer senior fares. Some retirees also let credit card points build all year and cash them in for flights or holiday gifts, provided the balance is paid off every month.
A Subscription Cleanup
Leaving the workforce tends to shorten the list of things worth paying for every month. Retirees may be able to move to a cheaper phone or internet plan, drop grocery subscriptions and memberships now that there’s time to hunt for deals, or swap a gym membership for outdoor walks and runs. Cutting expected retirement spending by just 13% could put nearly half of Americans on track, Investopedia reports.
Food and Coffee Budgets
Wholesale club memberships at Costco and BJ’s stop being worth it for some retirees once life after work settles in. Those who enjoy cooking often still come out ahead buying in bulk and meal prepping, even without a desk lunch to pack. Skipping the midday coffee run gets easier without a workday to step out of, and many stock up on coffee and simple ingredients instead.
Off-Season Trips and Fewer Cars
Retirees who want to keep traveling often book off-season, when flights, hotels, and car rentals tend to be much cheaper and crowds thin out, even if the weather is a bit colder. Some couples also drop a car, or two, once there is no daily commute. Those near reliable public transportation may not need one at all, and local trains and buses are worth checking for senior discounts.
The House Is the Big Asset
Vanguard calculates that 86% of boomers own homes, and the average boomer holds $113,000 in home equity. Researchers estimate tapping that equity would raise the share of young boomers prepared for retirement to 60% from 40%. Downsizing or moving to a lower-cost area can also trim property taxes and upkeep. It is a tricky topic, Hahn says, because a home often carries a strong emotional attachment to a person’s identity.
Content With Less
Some economists have sounded alarm bells about a retirement crisis, but David Blanchett, a certified financial planner and head of retirement research at Prudential, says it’s “not nearly as bad as it seems.” His research shows the typical retiree’s consumption falls 20% when they enter retirement, perhaps because of a lack of savings. Even so, data suggest about 90% are moderately or very satisfied with retirement.
