The worst that could happen to a retiree is to outlive retirement savings. You could be in that situation if you have less than one year’s worth of your income set aside for the last leg of your life. There are ways to keep more of your money and live comfortably in retirement.
Adopt a more frugal budget
A nice-to-have arsenal in the sunset years is a frugal retirement budget. It can be your most potent ally if you’re relying on limited savings and pension. Craft a budget that would give a semblance of a monthly paycheck.
Work within the amount and track your spending so as not to overshoot the budget. It would be best if you were spending less than your self-made plan. Every time you can save a dollar or two, you’ll have more for the all-important healthcare costs.
Cut costs and invest
Cutting costs could be as simple as following a grocery list, eating out less, or engaging in free entertainment like reading a book or strolling at the park. A $1 daily savings or $7 weekly can go a long way.
You can invest in an income-producing asset with the amount. For example, you own shares of Pro REIT (TSX:PRV.UN). The stock price of this $271.65 million real estate investment trust costs only $7 per share.
This REIT pays an incredible 8.29% dividend. With its high-yield, an investment of $7,000 can produce $580.30 of annual income. You can generate more income with a higher investment amount. Similarly, you have a supplement to your Old Age Security (OAS) and Canada Pension Plan (CPP) pension.
The real estate portfolio of Pro REIT is highly diversified and consists of retail, mixed-use, industrial, and office properties. You can find the rental properties in the primary and secondary markets of Ontario, Québec, and Atlantic Canada, particularly New Brunswick. A quality tenant profile delivers stable cash flows.
Pro REIT is also a distinguished member of the TSX Venture 50 before graduating to the TSX in May 2019. The number of owned and managed properties has tripled in the last five years. At present, its gross leasable area stands at more than 4.4 million square feet.
Many income investors are riding on the growth momentum of Pro REIT. Its portfolio of income-producing properties is growing, which means better economies of scale plus higher rental income. This REIT reduces portfolio risks through its diversification strategy.
Downsizing to a smaller home or moving into an area with a lower cost of living will help retirees free up more cash. If you can bring down maintenance costs, you can stretch out your post-retirement money.
Rather than selling your house, rent a small apartment, then rent out your home. If selling is an option, use the proceeds to invest. However, the decision to downsize depends on your circumstances. Weigh your alternatives to see where you get the biggest advantage.
While retirement planning is a serious undertaking, the key to a comfortable retirement comfortably is to look for economic benefits that will allow you to keep more of your money than see it dwindle.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned.