Retirement is expensive. As GOBankingRates previously reported, the Bureau of Labor Statistics found that people age 75 and older spend $38,691 per year, on average. What’s the biggest expense retirees face?
While healthcare is a major one — the average retiree spends $6,749 per year on healthcare, according to a recent Harvard study reported by Entrepreneur — it’s not the biggest expense for most. The Harvard study found that housing, at a national average of $17,454 annually for retirees in 2021, remains the highest cost for the average retiree. Housing includes rent or mortgage payments (including principal, interest, taxes, and homeowners’ insurance). Utilities and home maintenance and repairs also factor into these costs.
Earlier retirees, ages 65 to 74, tend to spend more on housing. That’s because they are the group of retirees most likely to have mortgage.
Fortunately, there are some ways you can manage housing costs as you head into retirement.
Pay Off Your Mortgage Early
Paying off your mortgage before you retire can help you manage expenses in your later years. If you can make just one extra payment per year toward your principal — which you could break up into 12 monthly payments – you can shave years off your loan.
Don’t Take On a Second Mortgage
It can be tempting to tap into your home equity to pay off high interest credit card debt, complete a home remodeling project or even go on vacation. But if you’re close to retirement age — and don’t foresee paying off that mortgage before retirement — you may want to reconsider.
If your children are already grown and moved out, you may find you don’t need all the space in your current home. Consider downsizing to a smaller house or even renting an apartment. You can stash away some of the profit from the sale of your home toward your retirement savings.
Generate Rental Income
If you have a large house with space you aren’t using, you might consider renting it out to offset your expenses. If your neighborhood is zoned for multi-family housing, you might even create an apartment within your home.
Move to a Less Expensive Area
Of course, retirement costs vary widely depending on where you live. To reduce your housing expenses, you may consider moving to one of the cities GOBankingRates identified as places where you can retire on just $1,500 a month.
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This article originally appeared on GOBankingRates.com: Retirement Planning: The Largest Expenses Average Retirees Pay and How To Prepare Now