6 Ways You Can Cut Costs Right Before You Retire

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Worried about covering your daily living expenses in retirement? You're far from alone. A study released late last year by the Transamerica Center for Retirement Studies found that only a small percentage of U.S. workers are "very confident" about being able to fully retire with a comfortable lifestyle.

If you have some doubts about how you're going to fund your retirement years, there are some steps you can take now, in the years leading up to your retirement, to prepare yourself financially for the day in which you leave the workforce. By reducing these expenses before you retire, you'll give yourself the chance to boost your retirement savings in the last few years before you leave the working world.

You'll also take an important first step toward setting up a post-retirement lifestyle that might, depending upon how much you've saved, require you to cut back on many of the expenses you take for granted today.

1. Housing

The cost of housing, of course, is the biggest financial burden that most people face. Bringing a mortgage with you into retirement can cause plenty of financial stress each month. But even if you are no longer paying off a mortgage, the cost of maintaining a large single-family home can be high.

If you still have a mortgage, it might make sense to pay it off before you leave the working world. If you can't afford to do that, you might consider selling your home. If you have enough equity in your residence, you might be able to use the profits to buy a downsized residence — maybe a condo unit — in cash.

If you've already paid off your mortgage, you'll have more flexibility. If your home requires too much maintenance, or if your property taxes and homeowners insurance are too high, you can sell and move into a smaller residence that requires less maintenance or a condo building that comes with far lower property taxes.

You'll no longer need to worry about living in a higher-taxed area with better public schools, so finding a residence with lower annual property taxes shouldn't be too much of a struggle. And if you purchase a smaller home or condo, your annual homeowners insurance bill won't be as high.

2. Insurance

Now might be a good time to review how much you are spending each year on your insurance.

First, if you no longer have any dependents who'd need financial help after you die, you can drop any life insurance coverage you might still have. That can immediately save you a significant sum of money each year.

You'll no longer need disability insurance, either, after you leave the workforce. Don't drop disability before you retire, but do figure that the cost of this insurance will disappear once you stop working.

You might also look at the deductibles you've set up for your auto and homeowners insurance policies. It makes sense to set your deductibles low when you are working. If you have a deductible of $250 for your auto insurance policy, for instance, you'll have to pay for the first $250 in costs after an accident while your auto insurer will cover anything after that.

But lower deductibles increase the amount you pay in insurance premiums. When you raise your deductibles, you'll pay less for your auto and homeowners' insurance policies. By the time you reach your retirement age, you might have enough saved to cover these higher deductibles, and moving to lower payments for your insurance policies might help you cover your daily living expenses.

3. Credit card debt

One of the biggest burdens on your retirement could be credit card debt. This debt comes with high interest rates — as high as 20 percent or more in some cases — and can grow quickly. If you carry a balance on your cards from month to month, you'll be stuck paying that minimum required monthly payment every time your credit card bills come due.

If you have a lot of credit card debt, it's important to pay off as much as possible as you approach retirement. You can do this using one of three tested approaches: the debt snowball, debt avalanche, or debt snowflake method.

In the snowball method, you list your credit card debts from smallest to largest. You then take any extra money you have and focus on paying off the smallest bill first. Once you've paid off that bill, you'll move on to your next smallest credit card bill and pay that one off.

In the avalanche method, you organize your credit card bills by interest rate, from high to low. You then use any extra money to pay off the card with the highest interest rate as quickly as possible. Once you pay off that card, you then move to the card with the next highest rate.

If if you find yourself struggling to come up with large debt payments, the snowflake method may work well for you. In this strategy, you'll look for ways to shave dollars off of everyday expenses, such as groceries or gas. You'll then use those savings to make small but frequent payments on your credit card debt. Every little bit helps.

4. Your cars

Cars are expensive. Not only do you have to pay for their upkeep and gas, but you also need to insure them. Going from two cars to one or downgrading to a less expensive car can help you dramatically reduce your daily living expenses.

If you can swing it, going from two cars to one will reduce the amount you pay each year in auto insurance. But maybe you can't do this while you are still working. If not, you can still downgrade from a more expensive car to one with lower monthly payments and lower insurance costs.

Consider this carefully, though. If you've paid off your car, it probably makes more sense to live with it for as long as you can. That way, you won't have to worry about monthly car payments. If you are still making payments on it, though, downgrading to a nice but less costly vehicle might be a good way to reduce your daily living expenses even while you're still working.

5. Dining out

The Bureau of Labor Statistics reported that in 2015, the average U.S. household spent $3,008 on restaurant meals and take-out food. This should inspire you to look at how much money you spend each month on eating out.

It's not that you should never eat out. But if you are worried about covering your daily living expenses once you retire, reducing the number of times you dine out at a restaurant is one monthly expense that you can easily control.

Instead of eating out whenever you'd like, try budgeting each month for a certain number of restaurant meals. Then don't break that budget. Doing this before you retire will help build your discipline for the days in which you are no longer working.

6. Entertainment

Going to the movies instead of streaming one at home. Taking several vacations a year. The most expensive cable subscription with the most channels. All that entertainment adds up. You can significantly reduce your expenses before retirement by spending less on entertaining yourself.

You might think you're depriving yourself, but streaming a movie can be just as much fun as going to the theater, and it can save you plenty of dollars. You can even rent movies for free from your local library or through the online rental services that many public libraries now feature. Why not take a break from that big expensive trip for the next few years and take smaller weekend jaunts instead? You can then save the money you would have spent so that you have more to spend in your retirement years.

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