5 Ways to Save Money in Retirement

A potentially emotional decision about retirement expenses is a possible need to downsize your housing, says Kober. Although adult children may be emotionally attached to the old homestead, "you may need to have the brutal, honest conversation with your family and say, 'This isn't a long-run sustainable housing situation.' You can reduce your housing costs and spend more time and money on leisure activities."

Gordon J. Bernhardt, CPA, a financial planner with Bernhardt Wealth Management in McLean, Va., agrees. Many consumers bought too much house or spent too much money on rental properties during the real estate boom and now may face a cash flow problem in retirement. "Is the individual overextended? Did he or she buy too much real estate and is facing the consequences of negative cash flows? In the cases we have seen, that individual is still above water, but selling the property will help their cash flow."

But remember there are a number of costs involved in moving, including real estate commissions and potentially higher property taxes. Also, according to Bankrate's 2010 Closing Costs Survey, average closing costs on a $200,000 home were $3,741.

Experts say one golden rule of retirement should be "Plan what you spend, spend what you plan." "Too many people don't have a budget," says Michael Kay, a certified financial planner who's president of Financial Focus in Livingston, N.J. "You need to know which costs are fixed costs, and which costs are discretionary. It's the discretionary costs that you choose, that you can trim."

Before you can cut your discretionary spending, you have to know how much it is. So keep track on what you're spending for frills like entertainment, travel or impulse purchases.

Dining out is one place to put your budget on a diet, says Bernhardt. "Our clients have shared that they did not realize how much money they spent on eating out until they changed their habits and ate at home more often," he says. "And they did not feel like they were making a significant sacrifice."

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