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There's some good news on the economic front: wages are rising. Yet here's the bad news: for workers, these increases are just barely keeping pace with inflation. Retirees on Social Security face an even tougher predicament: Their increases in monthly income have lagged behind the rise in cost-of-living expenses.
Among boomers on either side of the retirement transition, those who don't cut their spending will find themselves just treading water, without extra money to save for—or live comfortably in—retirement.
The average weekly earnings of all private-sector employees rose 2.1% from the second quarter of 2013 to the second quarter of 2014, while the consumer-price index for all goods also rose 2.1% during the same period, according to the Bureau of Labor Statistics. Meanwhile, those collecting Social Security received a cost-of-living increase of just 1.5% in 2014. "This is a really low number," said Mary Johnson, Social Security and Medicare policy analyst with the Senior Citizens League, an Alexandria, Va.-based nonpartisan lobbying group, noting that the average annual increase was 3% in the early 2000s.
The Senior Citizens League analyzed typical expenses for older adults this spring and found that, while overall inflation has remained low in recent years, other costs are climbing at a sharper rate. From 2000 to 2014, for example, monthly Medicare Part B premiums grew 131%; during that same period, the Social Security cost-of-living adjustment increased benefits just 41%.
There's all the more reason, then, to get creative when it comes to savings. Here, we've rounded up a few strategies for your consideration:
Accordion-folder coupon holders have gone the way of pay phones. These days, it's not necessary to literally clip and file coupons, since so many discounts can be found online.
Regardless of where you find them, though, it's easy to get overwhelmed. Television shows like TLC's "Extreme Couponing" feature people who routinely whittle their shopping bills by hundreds of dollars—but those people also treat scoring deals like a job, spending time that the average person couldn't possibly devote to the cause. The shows help foster the impression that couponing is an all-or-nothing sport, said Lori Felix, founder of More With Less Today, a savings website, and a deal-hunting consultant with Savings.com.
In reality, every bit of savings adds up, and it's fine to take a more selective approach. Felix recommends novice couponers pick just one spending category to start, such as pet supplies or beauty products, and become knowledgeable on discounts in that category. For people happy to clip, many newspapers still include coupon circulars; online, websites such as coupons.com allow users to register a credit or debit card and then receive discounts whenever using the same card to make a purchase. One such deal is $5 off for those who spend $25 or more at PetSmart.
(MarketWatch's Catey Hill recently looked at stores that are particularly generous with coupon offers; she also wrote about apps that help you manage all those coupons. Read "5 stores where you should never pay full price.")
Coupons are harder to come by for food staples like eggs and potatoes, despite the fact that their prices have risen considerably in recent years—up 116% and 101%, respectively, from 2000 to 2014, according to the Senior Citizens League analysis. Favado is an app for smartphones from Savings.com that allows users to compare prices for common grocery and drugstore items across local stores to help users find the best deal.
Many people aren't accustomed to comparison-shopping for medical care, but these days that skill is becoming more important. An increasing number of employers are offering high-deductible health-insurance plans, which require workers to pay deductibles of $1,000 or more before their coverage kicks in.
Deductibles are typically even higher for people with individual insurance plans. For example, the average deductible for silver-level plans bought on the state Obamacare exchanges is $3,132, according to an analysis by Avalere Health, a consulting firm. This means that, in addition to paying monthly premiums, a consumer in the average silver plan will have to pay $3,132 out of pocket each year before insurance kicks in (except for a limited number of preventative-care and other services that are fully covered before the deductible is reached).
Prices for every type of medical procedure can vary greatly depending on where the procedure is performed, said Doug Ghertner, president and CEO of Change Healthcare, a firm that offers cost comparison tools to both employer-provided and individual health plans. Generally, stand-alone outpatient facilities are the least expensive, and academic medical centers are the most expensive, with nonacademic hospitals in the middle. Prices for knee replacements varied by a whopping 1,687% across facilities, according to a recent Change Healthcare analysis of claims data.
Most insurance plans offer online tools that allow consumers to research what their actual costs would be if they get a given procedure at local facilities. But consumers aren't using them much, Ghertner said. To help boost awareness, Change Healthcare has started comparison-shopping on consumers' behalf, sending people notifications such as "Did you know you could save $200 on your physical therapy?"
The need to comparison-shop doesn't end when people go on Medicare, the government insurance plan for those 65 and over and those with certain disabilities. Part D drug plans often change their coverage from year to year, dropping and adding certain medications from their preferred lists. Those who don't review their plan details annually could face big out-of-pocket costs for drugs that their plan dropped. The annual Medicare open enrollment period runs this year from October 15 to December 7, and consumers can switch plans any time during this period. Combing through plan details may be "miserable," Johnson said, "but you get a good return for your time spent."
Some folks aren't eager to self-identify as a "senior," and understandably so, given the word's outdated connotations. But it's best not to let semantics get in the way of savings. Felix, 57, laughed it off when she recently caught some flack from friends after receiving a senior discount at the movies. "I'd rather have the money in my pocket than worry about what the kid behind the window thinks of me," she said. What's more, many of these discounts begin at age 55, or even 50, so people can take advantage of them long before they'd be considered old by any reasonable definition. Indeed, some might say the term "senior" lost any meaning it had left last December when Brad Pitt turned 50—and became eligible for an AARP membership.
Some stores give older adults discounts on select days. For example, on its monthly senior discount days, Walgreens gives 20% off regularly priced merchandise to those with a store rewards card who are 55 and over and to AARP members 50 and over.
Travel still offers some of the biggest senior deals, even though many airlines have cut their age-related discounts. Among those that remain, British Airways currently has a promotion for AARP members, who can save $65 on economy flights, $130 on premium economy flights, and $400 on business or first-class flights. AARP members receive up to 25% off Avis and Budget car rentals in most of the U.S. and Canada.
Hilton Hotels offers AARP members up to 10% off hotel reservations. And Starwood Hotels has an offer where guests pay a rate equal to their birth year for the second and third nights; for example, after one night at full rate, someone born in 1964 would pay $64 for nights two and three. Guests need to be at least 18 or 21 to participate (depending on the hotel's check-in policy), so it's not like teenagers born in 2000 can snag a room for nothing. And certain pricier hotels add $100 to the birth year, which still might come out to much less than the full rate. Customers can check availability online or call 1-877-782-0108 and ask for promo code NBR.