How To Adjust Your Retirement Budget When Expenses Rise.

If you get hit with a higher bill than expected, what do you do? If you just pay it, you’re missing out on all the bargain hunting fun we retirees get to do now that we have more time in retirement. In retirement we have to contend ourselves with constant rising prices. Call it inflation, call it corporate greed….whatever it is, we have to learn how to resolve our financial predicaments. Our first impulse might be to go out and earn more money, but in retirement that isn’t always possible. We might be too ill or too old. However we slice it, despite being on a fixed income we have to find solutions to help us keep our balances in check.

One of the major expenses most retirees have to contend with is the constant, steady rise in health care expenses. As I said, some of us may not have that three legged stool to fall back on (Cash consisting of savings account, Social Security & Pensions, Investments consisting of income from annuities, stocks, bonds, CD’s and other Wall Street factions, Work consisting of actual labor) to help offset rising costs.

I’ve had two major rising expenses to contend with these past two months. The first being an 85% increase in my Part D Medicare Health Care Insurance. In inflation numbers, the cost to cover my medications increased a whopping 46%. I would need 46% more cash to pay for the same exact medication as I had last year. No investment is going to give me a 46% return. What to do?

medicare drug plans.png
My original Part D cost was $37.30 a month. It was being raised to $69.10 a month, an increase of 85% or in inflation terms 46%. I needed to increase my income by 46% in order to afford the new plan. Instead, I researched and found I could get my same meds from the same company, Humana by simply choosing another plan. I reduced my medication expenses by a potential 81% or by an actual 65%. By doing my due diligence, I lowered my medical costs. I didn’t play victim to either inflation or rising medical costs.

To calculate both the rising costs and inflation costs of most everything you buy, here is the formula. You subtract the old cost from the new cost to come up with the difference. If you want to know the rise in costs, divide the difference into the original number and then multiply by 100. To calculate the inflation rate, take that same difference and divide it into the new cost of the item and then multiply by 100.

inflation equation.png

The second financial problem I encountered within the last two months, was an income decrease on a fixed rate CD I was invested in since late 2017. The CD was paying a fantastic, steady, monthly 4.25% but recently got called by the bank. That meant all my investment money was returned to me and the CD was closed and gone forever. Try as I might to re-invest the same amount of money for the same income, I was coming up $136 short per month. Over the year that reduction totaled $1,632 less per annum! When you are on a fixed income how do you make up this deficit?

Well, first off, see Number One, up above. I lowered my medical expense an estimated $264 a year by choosing a less expensive Part D plan. Next, I looked over all of my monthly expenses to see what else I could cut. You may think at times that you’ve come to the end of the expense-cutting-road, but trust me, there’s always something you can do without. The obvious ones would be cable and cell phone but they are already at their lowest price points so those two ideas were moot. I decided to cut our restaurant meals from $125 a month down to $25. I eventually raised that back up to $50 a month (by eating out at more cost effective places such as Panera, McDonalds and a local cafe’ here in my neighborhood where you can still get a $1.75 croissant and a $1.25 cup of bottomless, fair-trade imported coffee for a nice Sunday brunch!) The $75 a month savings totaled a whopping $900 for the year!

I went through the usual review of all our insurance (car, RV and home) policies. Every one of them had already utilized the higher deductibles as a means of saving money, so those were moot also. I was able, however, to eliminate our dental insurance policies since they proved to be worthless. Too much out-of-pockets costs made those policies moot. This came to an annual savings of $516.

The last thing we did and in my opinion proved to be the most beneficial of all. We started using cash only for grocery shopping. You’d be amazed at the realization that when you only have $70 or so cash in your hand, you tend to follow your shopping list and do not throw impulse items into your shopping cart. I grocery shop now with cash in my wallet, a list in one hand and a calculator in the other hand. I know instantly how much I am spending and I will do anything to avoid the cashier embarrassment of not having enough money to pay for my food. My monthly food bill is still that $500 but there are no more extras in my cart. That deed alone must be saving me at least $100 a month, which totals another whopping amount saved of $1,200 for the year!

The less money I need to spend, the more my money can remain saved and invested. This year I finally qualified for the Senior Citizen property reduction program here in my state. Our taxes went down to $238 a month from $420 a month. That was a welcome financial relief savings of $182 a month, which equals $2,184 per year! DH said that one thing alone was more than sufficient to offset my rise in my Plan D coverage. To me, I see it as not withdrawing the $2,184 out of savings and ear marking it for something else. Like longer, more frequent vacations in our future. For now, the cash stays invested, earning us more, thanks to compounding. Hopefully we won’t need it to offset higher prices coming our way in the future. I hope we can just keep adjusting our spending by eliminating what we don’t need or want and concentrate on what we do need and want.

This is how and what we do to keep our expenses (between $2,400 to $2,900 a month) in balance. Our system may not work for everyone. If you have a different plan that works for you, please share. I may not have all the answers but I am always willing to listen and learn.

Live well and prosper, my friend. Live well and prosper.

SIDE NOTE: I did increase one of my categories. Since DH and I won’t be going to the movies much anymore (too expensive), I decided to cancel my Netflix Membership @$8.99 a month and replace it with Amazon Prime @$14.05 a month (taxes included). That’s a $5.06 monthly increase. I justify the added expense because have you seen what Netflix has (or hasn’t) been offering lately? Their choices in movies has been abominable. Amazon Prime not only has more (great, fabulous) movies, more TV shows and documentaries BUT you can also rent current, late edition movies starting at only $3.99 per view! I’ve been having a blast watching all these terrific movies (fantastic escape from real life!) Can’t wait till The Marvelous Mrs. Maisel Season 3 is released this November! In the interim, I’ve been drooling over Paul Newman movies, binging on FleaBag, a recent Emmy Award winning show and watching some of my own fave and former HBO series favorites, such as The Sopranos.

I moved our two recliners up close to our flat screen TV and let the movies rip. Life doesn’t get any better than that!

 

14 comments

  1. I love my Amazon Prime and counting down the days for the second season of Jack Ryan in November. They also have monthly first reads before they are release free.
    Kudos to all the budget cuts to make up your expenses. I was so excited when they called my 3.06% CD. I reinvested it the same day in preferred stocks and a REIT When the market was down, and have collected more then the yearly interest in capital gains and Then reinvested it again and Took the profit for my kitchen floor.
    Thanks for the heads up on new prescription plans. I have to look closely at them when I get home from Cape Cod. My AARP United Healthcare sent me an email that it has more benefits including gym membership. Sincerely, Lara

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    • We’re into Jack Ryan too. So good!
      My Medigap plan only went up $2 so I’m keeping it in place. I’d never go to a gym.
      I did my thing with bonds and S&P. Timing is everything.

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  2. You make it a fun challenge. We weren’t retired but in 2008 we had to go from a construction manager salary to my husband driving a truck over land — and our real estate investments looked like they were not going to provide our retirement. I was teaching as a grad student, but things were tight. It was surprising how much you can cut out to get by and still live pretty well. The stress wasn’t fun, but I did consider it all a challenge. I’m a fan of Amazon and considering dropping Netflix though we have tons of tv options for my dad who can’t do anything else anymore because of Parkinson’s and loves the NFL channel. Netflix can be easier for him to see movie options, limited though they can be. I noticed Amazon is more user friendly lately, though, so might just do it. Dad has to have Spectrum for NFL channel. These streaming deals like Hulu are good for young people or those who deal well with computers. But I will probably drop Netflix, too, once Dad doesn’t use it, AND Spectrum and stick with something like Hulu. Dad likes Jack Ryan and he likes all the Alaska shows. I enjoy your posts! Rather than get depressed, you make lemonade.

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    • Lynn, life is a lot of fun. Really. Sometimes you win. And sometimes you lose. All part of this game we call life! Hang in there.
      Two more streaming channels are coming out in November: Disney and Apple. The hype over them is that they both are going to be chock full of choices for only $5.99 a month! I’m waiting to see what they are going to be like. I might switch. Or just get Disney when the grandkids come over. We’ll see.
      Glad you dad likes the NFL. That’s very important.
      Thanks, as always, for your comment.

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  3. I love swimming and Water exercises and I think the YMCAs are included and there is one next to me and both my kids so I want To definitely take advantage of this and Their Silver sneakers and Chair yoga.
    Love, love what I reinvested In and will collect every three months Interest and dividends, what the CDs made in a year. A 400% increase. Never ever had that kind of raise in our working lives! Love this passive income stream. Thank you Lord for my Mentor! Lara

    Liked by 1 person

    • Lara, better make sure the YMCAs are covered. What are you paying per month for your Medicare Advantage Plan? Most of these plans are in the hundreds per month.
      I found my AARP Medigap policy to be sufficient for now. It only costs me $65 a month and I am responsible for only 10% of the already reduced Medicare coverage. This averages out to me only paying $12 to $15 per medical event.
      The local college here has an Olympic sized heated pool, sauna and all the gym equipment one could want (I only use either the treadmill or the elliptical). Plus yoga, stretching and palates classes. I buy the membership in $50 increments that have no expiration dates. I go when I feel like it with out any stress that I’m wasting my money. Each visit is around $4.54. Not bad. So far, this system has been working out well for me and hubby. We go when we want to. Otherwise we’re outside hiking or walking.
      I hear ya on those dividends. They’re very nice and most welcome! LOL!

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  4. Up until this week, I could still swim in warm water outside in local lakes, rivers, and the ocean. When temps go for daytime high of 80 and below, then the water is too cold for me so no more swimming outside until late April. I don’t like to swim inside but I think that is great option at the YMCA or local college if you enjoy that.I agree we have to find ways to cut expenses and you have done an outstanding job! I had to pay $50 co pay to Doctor and $18 co pay on meds this week because I had a pinched nerve in my lower back. I was literally crawling on the floor Saturday night and Sunday to go to bathroom. Our health insurance is a non negotiable. This was the first time this has happened and it made me grateful I could drive to doctor on Monday because I was unable to do that on Sunday. My kids would have driven down but really, when I retire I think I need to be 30 minutes away, not an hour and a half away from the two closest kids. I need to stay where I am until retirement but after then, I need to be closer to at least one kid. The question is, which one…lol. My housing cost will go up for sure.

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    • Cindy I hurt my back two weeks ago. Happened in a flash. I was moving a metal box and I froze in place. Couldn’t move. No one was home. What a horror. So I understand what you’re talking about. It took days before I could walk. I found that yoga stretches work wonders.
      I wish my kids would move back in with me but it’ll never happen. I’m thinking maybe roommates in the future?? Or at least a retirement community or assisted living?
      Lots to think about.
      Hope you’re feeling better. 🙏

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  5. Isn’t this what we save our money for? Healthcare is something I am willing to dip into my $250,000 for. Maybe I don’t understand that number though?
    Shattered my elbow two weeks ago. $30 co pays every new doctor plus PT. The upside- the $9,000 operation cost $81. Go figure.
    Cindy, we moved across country to be near a child. Now we are moving back. We have an agreement with her that if things look out of control to her, we will move to a 55+ community near her. Since we have moved 16 times in our marriage, we are not attached to a certain place. The only thing that has to move is the art 🙂

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    • Hi Janette. I’m with you on the 55+ community. I’m certain when my time comes too, I’ll check in to one near my daughters. I’m sorta tied to my home here but what will be, will be. We all do what we have to do,right?

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  6. With no job in sight for PC, we are beginning to make a list of things to cut should we have to in February. We have Amazon and Netflix and Hulu right now and probably don’t watch any of them much. Could surely cut back there. We are going to remain with the Army hospital healthcare for the coming fiscal year rather than switching to health care on the ‘outside’, which we prefer but is $400 a month more. Have cut back on movies and eating out some. But have been buying clothes and shoes with careless abandon. That will have to stop. Always a game of balancing, isn’t it?

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    • Hi Leslie. Yes it is. We constantly rebalance. You can watch great FREE movies on Crackle or You Tube (personally, I LOVE YouTube!) I don’t know if you have cable or satellite, but you can also put up a digital antenna and get free local channels too.
      You can get free music from Spotify. And you can download and listen to free podcasts. Those are educational and fun!
      That’s great you have the Army healthcare! That’s a very serious blessing.
      As to the clothes, you’d be amazed at what you will find at Goodwill and/or consignment ships. Go to your richest neighborhood and shop there! People foolishly toss away so many priceless gems. Plus, the hunting is 99% of the fun!!
      My husband was out of work for 2.5 years back in 2008. He couldn’t get a job pumping gas. Bosses can be so cruel. They said because he was so overqualified, he’d leave as soon as he got a ‘real’ job and they didn’t want to waste their time training him. Ditto for pizza deliveries. It was brutal.
      BUT our economy is much, much better now than what it was in 2008. I’m sure your PC will get some kind of work. He has to do a balancing act also! My husband was a Disney executive but when push came to shove he did what he had to do in order for us to keep a roof over our head, food on the table and all the bills paid on time.
      I will say a prayer tonight for you two. Hang in there. Don’t wait for the axe to drop. If there are things you can cut now, do it. And if you can return some of those clothes, do that too.

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