Retirement often lasts for over 20 years and retirement funds can have to stretch for decades. Making your money stretch during retirement should be a combination of cost cutting, making sure you have claimed all you are entitled to and looking for the best financial deals.
Avoid Using Long Term Savings Accounts
Retirees should undertake a financial health check to ensure they are obtaining the best rates of interest on their money. Long term accounts will give better rates but this will mean money will be tied up for around five years. Two years is a preferable amount of time to tie up money and does keep options open. Beware of cashing in early as some accounts will penalise customers who withdraw savings before the stipulated time period. Certain accounts such as those supplied by the Post Office will give a fixed rate bond (fixed interest rate) for money invested for a one year period.
Make Some Income from Your Home
Retirees who own their home outright are sitting on an excellent nest egg. There is the option to sell and downsize to a smaller home. This can release some disposable cash and should result in smaller fuel bills and reduced rate council tax. Anyone who has an amount of equity built up in their property can also consider releasing some cash. Equity release is basically a loan that will be recovered by the lender once the house is sold.
Consider Letting a Room Out in Your Home
Letting out a room is an excellent way to bring in some cash and can be tax free. If a single person lets a room in their home they can earn up to £4,250 per year before they have to pay tax; if letting jointly the tax free amount is £2,125. This can be a very lucrative venture especially in large cities where room rents can fetch around £100 per week. Retirees who live in cities and towns with universities and colleges should not have a problem finding tenants. Always check tenant references and financial details before letting.
Make Sure to Claim All Entitlements
Retirees who have low savings can claim Pension Credits. Only 66% of those eligible for this payment do actually claim this tax return. The winter fuel allowance is another benefit that should be claimed. Anyone from the age of 60 to 79 is entitled to £250, those 80 years old and over can receive as much as £400 if living alone. The £400 winter fuel allowance is the maximum that can be claimed in households. If there are two people of eligible age then this will amount to £200 per person.
Beware of Energy Supplier Mistakes
There have been many reports of mistakes made by energy suppliers over the amount due from customers in energy bills. Always dispute bills that do seem higher than normal. Energy suppliers have been known to simply estimate bills and have been using the ‘catch up bill’ excuse. Many customers have been overcharged by hundreds of pounds and have simply paid up without disputing the bill. If possible, always send in meter readings rather than rely on the accuracy of the energy supplier.
Look For Ways to Save Money in the Home
There are a number of different ways to cut costs in the home. These can include:
- Insulating walls, lofts, doors and windows; this can reduce energy bills by as much as 60%
- Those over the age of 70 can receive grants from the government for free loft and wall insulation
- Always use off peak periods when using washing machines, tumble driers and heating water
- Turning a heating thermostat down by only 1ºC can save an estimated £30 per year
- Compare energy bills with friends and see who is getting the best deal and switch providers if possible
- Always look for senior discounts on items such as holidays, insurance and travel
- Retirees over the age of 75 are eligible for a free TV licence even if younger people stay in the home.
- Always enquire on senior discounts if repairs are being made to the home
Making money stretch is an important issue especially during retirement. Seeking out the best deals is not difficult thanks to the internet and comparison websites. It does make sense to claim all benefits and entitlements although many retirees are neglecting to do this. Once these cost saving methods have been set in place they should lead to significant savings throughout the year.