5 things middle-class Americans should ditch before they retire
Retiring on a low income requires a change of perspective. You move from the accumulation stage to the preservation stage, and often, the things you’ve spent decades buying become more of a hindrance than a help.
Many of these assets have hidden costs – insurance, maintenance and taxes – that can eat into a fixed budget.
By identifying and selling certain assets before you officially leave work, you can eliminate ongoing expenses and build a more solid cushion. Here are five things you should consider taking out to get your finances in order.
1. A very large family home
For many, the family home is the most important asset. However, it is also often the biggest factor in the monthly budget. If you live in a house with more bedrooms or more yard than you will need in retirement, you are paying to keep the space you are no longer using.
Downsizing to a small or low-cost property can significantly reduce your maintenance costs as well as your property taxes and insurance payments.
Aside from the monthly savings, selling your primary residence often comes with significant tax benefits. The IRS allows married couples filing a joint tax return to exclude up to $500,000 of gain from the sale of the primary home, while single taxpayers exclude up to $250,000.
2. Second car or hobby toy
Car maintenance is expensive. When you factor in maintenance and fuel, the annual cost of ownership often runs into the thousands of dollars. If your household has two cars but you no longer drive to the office, you may find that one car is more than enough.
The same concept applies to “toys” like boats or RVs. Although these items represent entertainment, they are notorious for high maintenance and maintenance costs.
Selling these assets before retirement provides immediate cash and, more importantly, stops the ongoing “leakage” in your monthly budget.
3. Professional wardrobe and office gear
Transitioning into retirement often means that your collection of office clothes will spend more time in the closet than on your back. High-end professional clothing often holds its value well on the secondary market.
Rather than letting these items gather dust, consider listing them on forums or special apps.
This also applies to any special office supplies or electronics you may have purchased for your side business or home office. Clearing these items can provide hundreds or thousands of dollars that are best served by .
4. Hobby collections and unused valuables
Many people spend years amassing collectibles – whether it’s jewelry, rare coins or antique appliances. While these items may have sentimental value, they are often dead assets in a financial sense because they do not generate income.
Selling a collection can be a smart move to simplify your estate and increase your cash flow.
5. Non-profit or employment side businesses
If you own a small business or a rental property that needs constant attention, ask yourself if the stress is worth it. For low-income retirees, the energy required to manage a rental property or a struggling business can be a physical and emotional burden.
Liquidating these business assets allows you to move your money to passive investments, such as dividend-paying stocks or bond ladders. This change ensures that you receive a constant income without the operating costs associated with running the business.
Ease your way to a secure future
The key to a successful retirement budget is often found in subtracting rather than adding. By identifying the assets that no longer serve your lifestyle, you can free yourself from unnecessary debt and focus your resources on the experiences that really matter. Every dollar saved on a maintenance fee or insurance premium is a dollar that stays in your pocket for a long time.
