How Retirees Can Live on a Tight Budget

by Gary Foreman

Haven’t saved enough for retirement? With these tips, you can still enjoy a comfortable retirement even while living on a tight budget.

You’re about to retire. And, like so many of us, you didn’t save enough for retirement. Now you’re wondering how retirees can live on a tight budget. Here’s a question I received asking about a retirement budget.

Dear Gary,
My husband and I plan on retiring next summer. He has a 401k, and we each have an IRA. The truth is we haven’t saved much for our retirement. Between us, we expect our Social Security to be about $30,000 a year. That’s less than half of what we’re making and living on now. How do retirees manage to live on such a tight budget?

A Lot of Retirees Will Be Living on a Tight Budget

Donna is not alone. According to, the average retirement account balance for those age 55 to 64 is only $374,000. And for most retirees, that balance gradually decreases as they begin spending their savings in retirement.

Many financial planners suggest that you can take a 4% income from your retirement savings each year without consuming the account. On average, that would be a little less than $5,900 a year or about $500 a month.

Donna didn’t say how much she and her husband have saved. Perhaps it’s less than the average. So is it possible for them to have a comfortable retirement on a limited budget? Let’s see if we can provide some tools for them to use to stretch that retirement budget. Some will probably work better than others for her. We’ll explore a lot of them and let Donna decide which ones will work best for her.

The Importance of Tracking Your Spending in Retirement

You need to know where all of your money is going. In fact, when you’re trying to live on a tight budget, it’s essential that you know where your money is going. When every dollar counts, you can’t afford to just let some slip away for things that you can do without. You may need those dollars later for something important.

Very few of us like to keep track of spending. Fortunately, credit card statements and budgeting apps make it much easier than it used to be. And, don’t tell yourself that you can’t learn an app. They’re not beyond your capabilities. If you need help, ask your grandkids!

Trimming the Fat from Food Costs

Reduce your grocery and food costs. After housing and auto, food is your biggest expense. Most retirees spend roughly 20% of their income on food. And, since cooking for one or two can seem unrewarding, it’s easy to eat out more often. That can add up quickly. Here are a few tools that you can use to reduce the cost of food living on a tight retirement budget.

Learn to cook.

The cheapest food you’ll eat is the food you cook yourself. When you were working, using the “I don’t have time to cook” excuse made some sense, but you don’t have that excuse now. There’s no reason that you can’t spend a few hours a week in the kitchen. And it doesn’t have to be drudgery. Put on some of your favorite music, turn on a talk show (TV or radio), or listen to a podcast. You might even discover a creative side when you start cooking. Perhaps even a new hobby. There’s an endless supply of recipes and spices to play with!

Learn to shop the perimeters.

When you’re shopping for one or two, it’s tempting to buy the precooked meals that you can toss in the oven or microwave. If you do, you’ll be paying too much for food that’s not that healthy for you.

In a typical grocery store layout, you’ll find the healthiest, least expensive foods around the outer areas of the store in the fruits and veggies section and where the meat, milk, eggs, and cheese are found. Yes, you might have to peel the potatoes, but they’ll cost a fraction of prepared potatoes and be a whole lot healthier, too!

Learn to seasonal shop.

Overnight worldwide transportation and new farming techniques have made virtually any food item available any day of the year, but that doesn’t make it the best way to shop. Our mothers and grandmothers knew how to take advantage of the low prices at harvest time and prepare foods for long-term storage. Some items were canned. Others were dried. Some were smoked. Most homes had a pantry full of foods that were “put up” when they were plentiful.

These techniques still work fine today. Stock up when prices are low at harvest time. Learn how to prepare foods for longer storage. You may need to buy some supplies, but the reduction in your grocery bill will repay you many times over.

Learn to shop generic.

Millions are spent advertising and marketing brand name foods, but with rare exceptions, they all have generic equivalents that are just as good and less expensive. In many cases, they’re packaged on the exact same line as the branded food.

Learn about meal stretchers like pasta, rice, and potatoes.

Many great meals start with pasta, rice, or potatoes. They’re nutritious, filling, and inexpensive. You’ll find hundreds of recipes online featuring these three food essentials.

Learn to eat out for less.

Americans are estimated to spend $2700 per person per year on meals prepared in restaurants, and retirees often lead the pack! Cooking for one or two can seem like more work than it’s worth. However, if you’re living on a bare bones budget, you need to avoid restaurant meals.

There are many ways to have the restaurant experience without the bill. Look for coupons, Groupons, and join your favorite restaurants’ email lists. Have your meal at home and then go for coffee and dessert.

Meeting Retirement Housing Needs While Reducing Housing Costs

Make your housing costs affordable. At any stage in life, keeping a roof over your head is one of the biggest (if not the biggest) budget items. The amount you spend on housing is especially critical when you’re living on a limited income.

You have many housing options to choose from. To help you make your decision you’ll need to consider:

  • the monthly cost
  • how much help you might need maintaining your home
  • any needed help with daily chores
  • how close are you to family and friends

Some choose to stay in the home that they’ve owned for years. Others opt to move to a smaller home, 50+ community, apartment, or condo. Still others look for a group home where some meals and care can be provided.

Choose your housing carefully. Not only is it a major budget item, but it’s also a decision that’s hard to undo.

A popular option for those choosing to remain in their home is a reverse mortgage. There are both advantages and disadvantages.

Driving Down Auto Costs in Retirement

Don’t spend too much on cars. When we were young, many of us dreamed of taking a Little GTO or the Beach Boys 409 to the track, and some of us are still car crazy. But it’s easy to spend too much on transportation, especially as a retiree living on a tight budget.

Doing routine maintenance can help your car last longer.

Most retirees put on fewer miles each year than the average driver. The cheapest car to own is typically the one that you already have. If you do need to replace your car, consider something that’s about three years old. Someone else will have soaked up about half of the depreciation.

And, if you’ve been a two-car family for years, it’s time to revisit the issue. Even if you don’t drive the second car, it will still cost you insurance, vehicle registration, and perhaps some tax.

Compare insurance rates.

You may have been with the good hands people for decades, but now’s the time to do a little comparison. We can help with that here.

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Keeping Medical Costs Healthy

Get the proper medical insurance. We all know that medical care can be expensive. “A 65-year-old, healthy couple can expect to spend $266,600 over the course of their retirement on Medicare premiums alone, according to HealthView Services. An estimate from Fidelity is a little less at $245,000. Neither include out-of-pocket expenses or long-term care costs” (source:

As you well know, Medicare doesn’t cover all your medical bills. “Fidelity Investments, which has been tracking retiree health care costs for more than a decade, estimates that a 65-year-old couple retiring this year will need $240,000 to cover future medical costs. Fidelity’s estimated $240,000 includes the cost of deductibles and copayments, premiums for optional coverage for doctor visits and prescription drugs, out-of-pocket expenses for prescription drugs, and other expenses that Medicare doesn’t cover, such as hearing aids and eyeglasses.” (source:

You may think that you can’t afford supplemental coverage, but your need for medical insurance in retirement is greater than any other time in your life. The odds that you’ll use that insurance are high. Retirees that have a medical issue without supplemental insurance often end up using their credit card to pay the bills. Debt is the last thing that you need in your retirement years.

Exercise to stay in good health. The best way to avoid big medical bills is to stay healthy, and one of the best ways to stay healthy is to get regular exercise. Exercise doesn’t need to be fancy or expensive. Many retirees enjoy a daily walk or bike ride. Even the tightest budgets can afford a used bike or some sneakers.

If you’d rather use a gym, check out the “silver sneakers” program. It provides free gym membership for many seniors. They even have a page that helps you identify gyms in your area that participate.

Spending Time, Not Money on the Kids and Grandkids

You can’t afford to support your adult children. It’s estimated that approximately 20 million young adults (between 20 and 31) have moved back home, and others still depend on mom and dad (that’s you and me) for financial assistance. If you’re on a tight budget, you have to cut them loose.

Truth be told, you’ll be doing them a favor. The longer you allow them to depend on you, the less capable they’ll be financially. And, isn’t our goal as parents to train them up to be self-reliant adults?

Don’t overspend on your grandkids. Most grandparents want to spoil their grandchildren, but if you’re on a tight retirement budget, you need to avoid the temptation. Don’t worry. Studies show that the things that you can’t buy them aren’t as important as the memories you make by spending time with them.

Avoiding Debt in Retirement Is Critical

Avoid debt like the plague! Debt of any type makes a tight budget almost impossible. Because most debts demand at least minimum payments each month, they’ll crowd out other needed expenses. With a tight budget, it’ll be tempting to use credit to cover purchases, but if you can’t afford to pay for it now, how will you be able to afford it when the cost of interest is added?

Reevaluating Your Insurance Needs

Cancel unneeded insurance policies like life. When you were young, it made sense to have sufficient life insurance, but now that your kids are grown and you’re retired, your insurance needs have changed. You still need enough life insurance to help provide the loss of Social Security or pension benefits for a surviving spouse. You also should have enough, so your heirs have sufficient funds for your final expenses (funeral and estate administration).

Beyond that, it’s wise to consider selling or dropping policies. Paid up policies can often be sold. If you have a term life policy, do a little math and estimate whether the payout at your death is worth the cost of the premiums now. Just because you needed that policy before doesn’t justify its existence now.

Cancel unneeded insurance policies like auto. It’s likely that you’re driving less than you used to, and that might mean that you’re keeping your cars longer. If your car is over three or four years old, you may want to drop your collision coverage. You could save hundreds a year in reduced premiums. That does mean that you’d be on the hook for any repair costs, so you’ll want to drive safely!

Making Retirement Dollars Count with Senior Discounts

Use every discount. When you’re living on a tight budget, you want to make every dollar count. Discounts are a great tool. Every retiree should make use of senior discounts. Anywhere you go ask if they have a senior discount. Many are available but not posted. (See Senior Discounts You Might Not Know About.)

Look for discount books and mailers. Take the time to register with online sites that offer discounts. Often it’s as simple as searching for a product or brand name and the word “discount.” If you’re concerned about privacy, create a separate email account that you only use for finding discounts.

Don’t buy just because of a discount. While discounts are good, don’t let them entice you to buy things that you don’t need or won’t use. You could have saved 90% of the purchase price, but if you don’t use it, you’ve actually wasted the 10% you spent.

Take advantage of credit card rewards. If you’re disciplined, credit card rewards can provide that little extra for your tight budget. You never want to spend money that you don’t have, but there’s no reason not to use a cash back card to buy groceries. Or a card that will provide points that you can use to reduce the cost of airfare to visit the grands.

Finding Free Retirement Fun

Find free entertainment. When you were raising your kids, the only entertainment you had time for was a little TV or watching the kids little league games. Now that you’re retired, you’d like to enjoy life. That can strain your budget, but it doesn’t mean that you can’t find free or affordable entertainment.

Many retirees volunteer at live events. You might usher at the local playhouse. Take tickets or man a drink booth at the county fair. You’ll usually get free admission and sometimes even make a few dollars. (See Volunteer Your Way to Some Free Fun.)

If you just want to be entertained, consider performances at your local college or high school. Many are free or inexpensive. Find the website that lists local activities and make a habit of checking it when you’re ready for some fun!

Free adult/senior education classes are another affordable option. Not only will you learn something new (always good for our brains!), but you’ll also meet some people who share your interests.

Shopping for Used, Not New and Needs, Not Wants

Learn to shop used. Baby boomers have generally been good consumers. We were raised in the Mad Men days when we were encouraged to shop often and with gusto!

But, if you’re facing a tight budget, it’s time to think used. Cars that used to be troublesome at 70,000 miles now last for 200,000. Do you really need a new car? Or would one that already has some miles on it be a cheaper alternative?

And the same thing is true for other smaller items. Before you go shopping, consider Craigslist or other places where you can find used, usable items for less money.

Understand the difference between wants and needs. When your income is good, you can afford some luxuries in your life. But when your retirement budget is tight, you need to make sure that every dollar goes to something that you need. Letting money slip through your fingers for things that you’d like to have isn’t an option. It’s important to know the difference between wants and needs and use your money accordingly.

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Reviewed February 2022

About the Author

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews.

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