Wednesday, June 6, 2012

Saving Money as a Retiree

As a financial advisor, senior clients look to you to guide them in their financial affairs. This also includes passing on tips on how to save money, especially when retired.

How often have you heard the question: “As a retiree, how can I save money and still buy quality goods and services?” Though expenses normally decrease overall when retired, some expenses stay the same or increase, depending on lifestyle choices. This is especially true if a person plans extensive travel or purchasing a ‘big ticket’ item such as a cottage or large boat.

The following are some proven ways to help your senior clients cut costs:

Transportation
A. Airline Fares
1. Compare low-cost carriers with major airlines. Remember, the best fares may not be out of the closest airport.
2. Money can often be saved by including a Saturday evening stay-over or purchasing a ticket at least 14 days in advance.
3. Check airline and internet travel sites for special deals.

B. New Cars
1. Great savings can be had by purchasing a car that combines a low purchase price with low depreciation, good financing rates, low insurance premiums, excellent mileage and low to average maintenance and repair costs. Search new car guides for this information.
2. Get price quotes from several dealers and let them know your shopping around. You may get a better price by taking a vehicle off the lot or one that is less popular in color.

C. Gasoline
1. Save hundreds of dollars by comparing prices at different stations, pumping gas yourself and using the lowest-octane called for in the owner’s manual.
2. Pay attention to price hikes. Buy gas when prices are traditionally lower, for example, Tuesdays and Wednesdays.
3. Save over $100 a year by keeping the engine tuned and tires inflated to their proper pressure. Check tire pressure at least once a month.

Insurance
A. Auto Insurance
1. Get quotes from at least four of the lowest-priced, licensed insurers.
2. Talk to your agent or insurer about raising the deductibles on collision and comprehensive coverage to at least $500 or, if an older car, dropping this coverage altogether.
3. Ask about age-related auto insurance discounts and credit for being a good, accident-free driver.

B. Homeowner/Renter Insurance
1. As with auto insurance, shop around. Using an insurance broker may help save time and money.
2. Make sure insurance coverage is enough to replace your house and contents.

C. Life Insurance
1. Buy term life insurance only.
2. If you buy a whole life, universal life or other cash value policy, plan to hold it for at least 15 years. Canceling policies after only a few years can more than double life insurance costs.

Banking Credit
1. Save money by selecting a free checking account or one with no minimum balance requirement. Request a complete listing of fees including ATM and debit card fees.
2. Ask about free or lower fees through direct deposit or agreeing to ATM use only.
3. Ask the bank manager about senior service charge discounts.

Saving Plans
Before opening a saving account, compare rates and fees offered by different financial institutions. Rates can vary greatly.

Credit Cards
1. Avoid late payment fees and possible interest rate increases by sending in your payment a week to ten days before the statement due date.
2. Avoid interest charges by paying off the entire bill each month. Try to shift the remaining balance to a credit card or line of credit with a lower rate.
3. Be cautious of credit cards with rebates, cash back, travel rewards and other perks as they may carry higher rates or fees.

Mortgage Refinancing
Consider refinancing a mortgage if a new rate that is lower than the existing rate comes available. Mortgage professionals can calculate how much the new mortgage will be and whether, in the long run, it will cost less than the current mortgage.

Home Equity Loans
1. Be cautious of taking out home equity loans. The loans reduce or may even eliminate the equity built up in the home.
2. Compare home equity loans offered by at least four reputable lending institutions. Consider the interest rate and annual percentage rate (APR), which includes costs such as origination fees, mortgage insurance and other fees.

As a trusted advisor, you can help guide your clients make better spending decisions. By sharing with them the above tips and others you have found useful, your clients will not only benefit from you advice, they will appreciate your caring regarding their everyday expense management.

Next month, I will list saving tips related to the cost of utilities including heating and cooling, telephone service. Also how to save money on food purchases, prescription drugs and funeral expenses. Check out my comments on discounts and freebies, tipping and loyalty programs.

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Richard (Rick) Atkinson, Founder and President of RA Retirement Advisors, is an expert in pre-retirement planning. He is author of the best-selling book, Don’t Just Retire – Live It, Love It! Rick facilitates workshops for clients of advisors and others. He is available for speaking engagements. www.dontjustretire.com". Twitter: @dontjustretire.