Ways to Build a Contingency Fund in Retirement

By Elliott Hollander –

Despite the importance of keeping a contingency fund, many Americans don’t have one.  Also called an emergency fund, a contingency fund isn’t your traditional savings account; it’s the funds you set aside for unexpected emergencies, such as a medical emergency or unforeseen home repair.

According to a recent report, a whopping 66 million Americans have no money set aside for an emergency. Another report found Americans across all income levels would have at least some trouble coming up with the money to pay for a $1,000 emergency. While a contingency fund is important at all phases of your adult life, it’s even more crucial during your retirement years when you rely on your 401K, Social Security, and pensions. Without an emergency fund, you would likely have to take out money from your retirement accounts. In your senior years, you’re also at greater risk for a medical emergency, making it all the more important.

Without a steady stream of income, it can be challenging to build a contingency fund. However, it can and should be done. Here are some ways you can save money and build an emergency fund in retirement.

Downsize

Most people have an empty nest when they retire. So, it’s time to ditch the four-bedroom home and downgrade to something more appropriate for your retirement years. Not only will you save by not having a mortgage; but also you’ll cut costs on maintenance and repairs, utilities, property taxes, and insurance. Consider moving to a retirement community. When you account for all the costs that go into owning a home, you can save big by renting an apartment or condo in a senior community. The monthly fee for a senior home often includes the cost of rent, utilities, maintenance, seasonal care, meals, and community amenities.

Along with downsizing your home, you can also save by selling your extra cars. This will slash expenses for car insurance, gas, and vehicle maintenance and repairs. A lot of senior communities offer transportation.

Utilize Senior Discounts

Many retailers, restaurants, hotels, airlines, pharmacies, attractions, and recreation centers offer senior discounts. Though the discounts may only be 10 or 15 percent off, the money you save here and there will add up. Always ask if a business offers a senior discount, and consider savings when choosing where to eat or shop.

Review Your Reoccurring Bills

Reevaluate your reoccurring bills, such as a cable bill, cell phone plan, and gym membership. The average cable bill is $99, while internet streaming services like Netflix and Hulu cost as low as $7.99 a month. By cutting ties with your cable and switching to Netflix or Hulu, you can save upwards of $90 a month. In addition to cable, reconsider your phone plan. Cell phone providers like Verizon Wireless and AT&T offer plans specifically for seniors. Or, switch to a prepaid cell phone plan, which lets you pay as you go and avoid the long-term contract.  

If you belong to a gym or fitness center, you may want to cut ties with them too. Seniors who move to a retirement community can often enjoy an on-site fitness center for no extra charge.  If you choose to retire in your family home, then look for gyms that provide senior discounts.

Accumulate Interest

Instead of storing all of your money in a savings account, store a sizeable amount in a money-market account or certificate of deposit (CD).  These accounts allow you to put your money to work and accumulate more interest. A money-market account has limited check writing ability and usually requires a higher balance than the traditional savings account. A CD is a time deposit; this means the money you put into the account is stored there for a predetermined amount of time, such as 1 or 5 years. The longer the period, the greater the interest you’ll accumulate. While it’s beneficial to store money in these types of accounts, your contingency fund should not be stored in this way because you don’t know when you’ll need to make a withdrawal.

These are a few ways you can save money and build a contingency fund in retirement. By maintaining an emergency fund, you’ll be prepared to cover any unexpected costs that may arise.

Elliott Hollander of SilverFox.care is available to discuss this topic in more detail. If you are interested in learning more, please contact Nicole Romeo at nromeo@webimax.com.