Retirement is expensive. According to the Bureau of Labor Statistics, households led by someone aged 65 or older now spend an average of $61,432 per year—about $5,100 each month. And for those still planning for retirement, these expenses are likely to rise even higher in the coming years. Thankfully, you can take various actions to ensure these expenses don’t become a source of stress in your golden years.
Key Takeaways
- Delay Social Security when you can: Waiting past 62 boosts your check ~7% per year to FRA and ~8% per year to age 70 — claiming at 62 permanently trims about 30%.
- Avoid Medicare pitfalls: Enroll during the 7-month window around your 65th birthday to sidestep lifetime late-enrollment penalties on Parts B and D.
- Load up while you can: Age 50+ catch-up contributions and HSAs let you shore up savings and healthcare reserves close to retirement.
- Cut fixed costs: Downsizing your home and paying off your mortgage tackle the biggest line item in retiree budgets — housing.
- Consider part-time work and LTC: A flexible side income adds cash flow and purpose; lock in long-term care coverage in your mid-to-late 50s while premiums are still low.
Build tax-diversified savings buckets
One of the quietest ways to make retirement more affordable is also one of the most powerful: having three different kinds of accounts to withdraw from. Most retirees do all of their saving in a tax-deferred 401(k) or traditional IRA, which means every dollar they pull out is taxed as ordinary income. That’s fine for covering everyday expenses, but it becomes expensive when a big one-time cost hits — new siding, a car, a medical bill, a wedding.
If you also have a Roth account (tax-free withdrawals) and a taxable brokerage account (long-term capital gains taxed at 0%, 15%, or 20% — well below ordinary income rates), you can choose where that lump-sum withdrawal comes from to minimize the tax hit. A $30,000 siding bill pulled from a 401(k) at a 24% bracket means you’d actually need to withdraw closer to $39,500 to net the $30K after taxes; the same bill pulled from a taxable brokerage with appreciated holdings might cost only $3,000–$4,500 in capital gains tax; from a Roth, you keep every dollar. Multiply that across a 25-year retirement and the savings add up quickly.
Building these buckets takes time, which is why starting in your 50s matters: contribute to a Roth IRA (or Roth 401(k)) when you can, use a taxable brokerage account for anything beyond retirement account limits, and consider Roth conversions in low-income years before Social Security and required minimum distributions (RMDs) kick in. A CFP® professional can help you map which bucket to tap first in retirement for maximum tax efficiency.
Delay collecting Social Security benefits
The age at which you start collecting Social Security (you can begin claiming as early as age 62) directly affects the amount you’ll receive each month. If you decide to take benefits before reaching your full retirement age (the point when you qualify for your full benefit), your monthly payments will be permanently reduced.
It’s helpful to remember that Social Security benefits grow by about 7% for every year you delay taking them between age 62 and your full retirement age. After reaching full retirement age, benefits increase by around 8% each year until you turn 70.
For example, let’s say the full amount of your Social Security benefit is $1,000 a month—the amount you’d get if you wait until your full retirement age. If you start collecting at age 62, your monthly benefit will drop by approximately 30%, leaving you with just $700.
As you can see, claiming benefits too early could mean missing out on thousands of dollars each year—money that could go a long way toward covering healthcare or other important expenses.
Avoid common Medicare mistakes
Medicare can be a lifeline for retirees, but it’s important to watch out for a few common pitfalls that can catch you off guard if you’re not prepared.
If you’re already receiving Social Security benefits, you’ll be enrolled automatically. But if not, you have a seven-month window to sign up—starting three months before you turn 65 and ending three months after your birthday. Missing these deadlines can mean paying higher premiums, sometimes for life. It’s worth taking a little time now to avoid the headaches (and extra costs) that come with common Medicare mistakes.
Consider catch-up contributions and HSAs
| Account | Base limit | Age 50+ catch-up | Total at 50+ |
|---|---|---|---|
| Traditional & Roth IRA | $7,500 | +$1,100 | $8,600 |
| 401(k), 403(b), 457, TSP | $24,500 | +$8,000 | $32,500 |
| SIMPLE IRA / 401(k) | $17,000 | +$4,000 | $21,000 |
Perhaps you didn’t invest as much as you had hoped in the decades leading up to retirement. Thankfully, it’s not too late! If you’re 50 or older, you can make catch-up contributions on top of standard limits — an extra $8,000 to your 401(k) and $1,100 to your IRA in 2026. (See our full breakdown of 2026 contribution limits.) These extra dollars grow tax-advantaged and compound meaningfully over even a short runway.
There’s also a newer wrinkle worth knowing: thanks to the SECURE 2.0 Act, workers aged 60 through 63 can make an enhanced “super catch-up” contribution to their 401(k), 403(b), or similar workplace plan — up to $11,250 for 2026, on top of the regular contribution limit, versus the $8,000 catch-up available to everyone 50+. It’s a short window — just four years — so if you’re in that age band and have the cash flow, it’s one of the most powerful ways to shore up your nest egg late in the game.
A health savings account (HSA) is another worthy investment to consider as you navigate retirement: allowing you to set aside money for medical expenses on a pre-tax basis and use the funds to pay for deductibles, copays, and other related costs.
HSAs offer a rare triple tax advantage — contributions, growth, and qualified withdrawals are all tax-free — and unused balances roll over indefinitely.
Note that New Jersey and California don’t conform to the federal treatment, so NJ and CA residents still pay state tax on contributions and investment earnings; the federal benefits still apply.
Seek part-time work
Oftentimes, the best way to save money is to simply make more of it! You can do this by seeking part-time employment during retirement.
Working as a retiree in fact comes with many benefits: keeping you more active, engaged, and social while helping to cover living expenses and providing more ways to save. What’s more, you can choose from dozens of part-time jobs—many of which you can do from the comfort of your own home, if you prefer. From online tutoring to translating and e-commerce, you can explore a wide variety of relevant job opportunities as you navigate retirement.
One nuance to watch: if you’re already collecting Social Security and haven’t yet reached your full retirement age, earning above the annual limit can temporarily reduce your check — $1 withheld for every $2 earned over the 2026 limit of $24,480. Once you hit FRA, there’s no earnings penalty regardless of what you make. (See how working impacts your Social Security benefits.)
Downsize your home
Downsizing your home is an obvious solution for reducing expenses and saving more during retirement, but remember: not all downsizing is good downsizing. You’ll thus want to dive into some research to determine whether the cost to do so is worth the trouble (it often is, depending on your situation).
To downsize, you’ll first need to obtain an accurate valuation of your property. You can enlist the help of a real estate agent or experienced independent appraiser to do so: giving you a more precise estimate than anything you’d find online. After learning the value of your home, you can begin to explore smaller living options for an amount within your budget that allows you to save.
Pay off debt
Debt, for many retirees, is a constant source of stress. Carrying too much debt into retirement can place additional strain on your fixed income, and if you don’t get it under control, you might need to cut back and adjust the budget you’ve become so accustomed to over the years.
One of the smartest moves you can make regarding debt is to pay off your mortgage. Given that housing is the biggest monthly expense retirees incur, you could be in for some significant savings by paying this off more quickly and thus redirect your money to other retirement essentials. According to a 2026 study by VISA, some 41% of homeowners aged 65-79 are still paying off a mortgage, so act sooner rather than later in this regard!
One caveat worth flagging: if you refinanced during the low-rate years and are sitting on a sub-4% mortgage, the math may not favor an aggressive payoff. The guaranteed “return” of paying down a 3% loan is lower than what a diversified portfolio can reasonably earn over time, and liquidity has value too — once dollars go into the house, they’re hard to get back out without a HELOC or reverse mortgage. If you have a higher-rate mortgage (say, 6% or above), the case for accelerating payoff is much stronger. Talk through the trade-off with a CFP® professional before locking in a strategy.
Plan for long-term care
The market has shifted. Traditional stand-alone LTC policies are harder to find and more expensive, so most buyers today use hybrid policies that pair life insurance or an annuity with a long-term care rider.
These pay out either way — care if you need it, a death benefit or cash value if you don't — which answers the “use it or lose it” concern many people have with traditional coverage. Both approaches have trade-offs worth weighing with a CFP® professional.
A responsible retirement means planning how your future may affect your family’s future. Discussing long-term care options with your spouse and children is vital for making wise financial and related decisions regarding power of attorney and other legalities.
According to the U.S. Department of Health and Human Services, a person celebrating a 65th birthday today has a 56-70% chance of needing long-term care services in his or her remaining years; while an estimated 14% will require care for more than five years. Although individual situations differ—especially if you have a family history of illness at a young age—experts recommend obtaining a policy in your mid-to-late fifties to lock in a lower premium. Accounting for long-term care within your budget and retirement planning can reduce the brunt of the financial stress you and your family will face as you age.
Keep in mind that the long-term care insurance market has shifted meaningfully over the past decade. Traditional stand-alone LTC policies have become harder to find and more expensive, and most buyers today use hybrid policies that combine life insurance or an annuity with a long-term care rider. These give you (or your heirs) a benefit either way — care if you need it, a death benefit or cash value if you don’t — which addresses the “use it or lose it” concern many people have with traditional LTC coverage. Both approaches have trade-offs, so it’s worth exploring options with a CFP® professional before deciding.
In sum
The truth is that a retirement lacking in preparation can induce feelings of anxiety that will only put a damper on this exciting stage of life if you’re not careful. To experience the full spectrum of emotional and physical benefits retirement has to offer, you’ll want to create a roadmap for how you plan to retire—from start to finish. The eight pathways discussed in this article provide a great start.
Have questions about planning your retirement? Schedule a FREE discovery call with one of our CFP® professionals to get them answered.
Reviewed for accuracy
Paul Muller, AEP®, CFP®
Founder and Relationship Manager at Vision Retirement, with 30+ years in the financial industry.
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Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.
