TIME

This Is the Retirement Regret Nobody Talks About

This is a big myth about retirement nobody talks about

There is ample evidence that baby boomers are working longer than any generation before them, pushing the “traditional” retirement age of 55 into the 60s, and with many — for personal or financial reasons — working right up to Social Security’s full retirement age of 67 and beyond.

People are living longer, and many older investors suffered losses when the stock market fell in the Great Recession. Today’s workplaces have been adjusting to accommodate for a growing number of older workers, and this trend towards putting off retirement is hailed as a generally positive shift in boomers’ approach to their golden years.

There’s just one thing: A lot of them regret it afterwards.

A new survey of retirees between the ages of 62 and 70 with $100,000 or more in investable assets conducted on behalf of New York Life found that nearly half of respondents wished they had retired earlier. More than half who were 60 or older when they retired regretted waiting so long.

On average, respondents wished they’d retired a full four years earlier than they actually did.

Three out of 10 retirees who had accumulated between $100,000 and $249,999 wished they’d retired sooner. About a quarter of those with between $250,000 and $1 million said the same, and even 20% of millionaires regretted not bowing out of the corporate rat race sooner.

“Investable assets and retirement age impact desire to retire sooner,” says David Cruz, a senior managing director at New York Life.

A lot of workers have been pushing themselves to work later in life, but hindsight makes them second-guess their decisions.

“As people age, they realize that during the time right before they retired they still had as much energy” as they did during their years in the professional world, Cruz says. Then as they age, it dawns on them that they were wasting the potentially best years of their retirement in the office. “They realize that having flexibility during those earliest potential retirement years can be priceless,” he says.

It’s a classic case of not knowing what you’ve got until it’s gone — and it’s something that’s conspicuously absent in most of the conversations we have today about what makes for a satisfying retirement.

“We think that as people age and slow down, they realize how much they would have enjoyed additional years of flexibility when they were younger and more energetic,” Cruz says. “Most people spend a lifetime accumulating retirement assets but don’t know how to turn those assets into a fulfilling retirement.”

MONEY 401k plans

The Secrets to Making a $1 Million Retirement Stash Last

door opening with Franklin $100 staring through the crack
Sarina Finkelstein (photo illustration)—Getty Images (2)

More and more Americans are on target to save seven figures. The next challenge is managing that money once you reach retirement.

More than three decades after the creation of the 401(k), this workplace plan has become the No. 1 way for Americans to save for retirement. And save they have. The average plan balance has hit a record high, and the number of million-dollar-plus 401(k)s has more than doubled since 2012.

In the first part of this four-part series, we laid out what you need to do to build a $1 million 401(k) plan. We also shared lessons from 401(k) millionaires in the making. In this second installment, you’ll learn how to manage that enviable nest egg once you hit retirement.

Dial Back On Stocks

A bear market at the start of retirement could put a permanent dent in your income. Retiring with a 55% stock/45% bond portfolio in 2000, at the start of a bear market, meant reducing your withdrawals by 25% just to maintain your odds of not running out of money, according to research by T. Rowe Price.

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Money

That’s why financial adviser Rick Ferri, head of Portfolio Solutions, recommends shifting to a 30% stock and 70% bond portfolio at the outset of retirement. As the graphic below shows, that mix would have fallen far less during the 2007–09 bear market, while giving up just a little potential return. “The 30/70 allocation is the center of gravity between risk and return—it avoids big losses while still providing growth,” Ferri says.

Financial adviser Michael Kitces and American College professor of retirement income Wade Pfau go one step further. They suggest starting with a similar 30% stock/70% bond allocation and then gradually increasing your stock holdings. “This approach creates more sustainable income in retirement,” says Pfau.

That said, if you have a pension or other guaranteed source of income, or feel confident you can manage a market plunge, you may do fine with a larger stake in stocks.

Know When to Say Goodbye

You’re at the finish line with a seven-figure 401(k). Now you need to turn that lump sum into a lasting income, something that even dedicated do-it-yourselfers may want help with. When it comes to that kind of advice, your workplace plan may not be up to the task.

In fact, most retirees eventually roll over 401(k) money into an IRA—a 2013 report from the General Accountability Office found that 50% of savings from participants 60 and older remained in employer plans one year after leaving, but only 20% was there five years later.

Here’s how to do it:

Give your plan a shot. Even if your first instinct is to roll over your 401(k), you may find compelling reasons to leave your money where it is, such as low costs (no more than 0.5% of assets) and advice. “It can often make sense to stay with your 401(k) if it has good, low-fee options,” says Jim Ludwick, a financial adviser in Odenton, Md.

More than a third of 401(k)s have automatic withdrawal options, according to Aon Hewitt. The plan might transfer an amount you specify to your bank every month. A smaller percentage offer financial advice or other retirement income services. (For a managed account, you might pay 0.4% to 1% of your balance.) Especially if your finances aren’t complex, there’s no reason to rush for the exit.

Leave for something better. With an IRA, you have a wider array of investment choices, more options for getting advice, and perhaps lower fees. Plus, consolidating accounts in one place will make it easier to monitor your money.

But be cautious with your rollover, since many in the financial services industry are peddling costly investments, such as variable annuities or other insurance products, to new retirees. “Everyone and their uncle will want your IRA rollover,” says Brooklyn financial adviser Tom Fredrickson. You will most likely do best with a diversified portfolio at a low-fee brokerage or fund group. What’s more, new online services are making advice more affordable than ever.

Go Slow to Make It Last

A $1 million nest egg sounds like a lot of money—and it is. If you have stashed $1 million in your 401(k), you have amassed five times more than the average 60-year-old who has saved for 20 years.

But being a millionaire is no guarantee that you can live large in retirement. “These days the notion of a millionaire is actually kind of quaint,” says Fredrickson.

Why $1 million isn’t what it once was. Using a standard 4% withdrawal rate, your $1 million portfolio will give you an income of just $40,000 in your first year of retirement. (In following years you can adjust that for inflation.) Assuming you also receive $27,000 annually from Social Security (a typical amount for an upper-middle-class couple), you’ll end up with a total retirement income of $67,000.

In many areas of the country, you can live quite comfortably on that. But it may be a lot less than your pre-retirement salary. And as the graphic below shows, taking out more severely cuts your chances of seeing that $1 million last.

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Money

What your real goal should be. To avoid a sharp decline in your standard of living, focus on hitting the right multiple of your pre-retirement income. A useful rule of thumb is to put away 12 times your salary by the time you stop working. Check your progress with an online tool, such as the retirement income calculator at T. Rowe Price.

Why high earners need to aim higher. Anyone earning more will need to save even more, since Social Security will make up less of your income, says Wharton finance professor Richard Marston. A couple earning $200,000 should put away 15.5 times salary. At that level, $3 million is the new $1 million.

MONEY 401(k)s

How to Build a $1 Million Retirement Plan

$100 bricks and mortar
Money (photo illustration)—Getty Images(2)

The number of savers with seven-figure workplace retirement plans has doubled over the past two years. Here's how you can become one of them.

The 401(k) was born in 1981 as an obscure IRS regulation that let workers set aside pretax money to supplement their pensions. More than three decades later, this workplace plan has become America’s No. 1 way to save. According to a 2013 Gallup survey, 65% of those earning $75,000 or more expect their 401(k)s, IRAs, and other savings to be a major source of income in retirement. Only 34% say the same for a pension.

Thirty-plus years is also roughly how long you’ll prep for retirement (assuming you don’t get serious until you’ve been on the job a few years). So we’re finally seeing how the first generation of savers with access to a 401(k) throughout their careers is making out. For an elite few, the answer is “very well.” The stock market’s recent winning streak has not only pushed the average 401(k) plan balance to a record high, but also boosted the ranks of a new breed of retirement investor: the 401(k) millionaire.

Seven-figure 401(k)s are still rare—less than 1% of today’s 52 million 401(k) savers have one, reports the Employee Benefit Research Institute (EBRI)—but growing fast. At Fidelity Investments, one of the largest 401(k) plan providers, the number of million-dollar-plus 401(k)s has more than doubled since 2012, topping 72,000 at the end of 2014. Schwab reports a similar trend. And those tallies don’t count the two-career couples whose combined 401(k)s are worth $1 million.

Workers with high salaries have a leg up, for sure. But not all members of the seven-figure club are in because they make big bucks. At Fidelity thousands earning less than $150,000 a year have passed the million-dollar mark. “You don’t have to make a million to save a million in your 401(k),” says Meghan Murphy, a director at Fidelity.

You do have to do all the little things right, from setting and sticking to a high savings rate to picking a suitable stock and bond allocation as you go along. To join this exclusive club, you need to study the masters: folks who have made it, as well as savers who are poised to do the same. What you’ll learn are these secrets for building a $1 million 401(k).

1) Play the Long Game

Fidelity’s crop of 401(k) millionaires have contributed an above-average 14% of their pay to a 401(k) over their careers, and they’ve been at it for a long time. Most are over 50, with the average age 60.

Those habits are crucial with a 401(k), and here’s why: Compounding—earning money on your reinvested earnings as well as on your original savings—is the “secret sauce” to make it to a million. “Compounding gives you a big boost toward the end that can carry you to the finish line,” says Catherine Golladay, head of Schwab’s 401(k) participant services. And with a 401(k), you pay no taxes on your investment income until you make withdrawals, putting even more money to work.

You can save $18,000 in a 401(k) in 2015; $24,000 if you’re 50 or older. While generous, those caps make playing catch-up tough to do in a plan alone. You need years of steady saving to build up the kind of balance that will get a big boost from compounding in the home stretch.

Here’s how to do it:

Make time your ally. Someone who earns $50,000 a year at age 30, gets 2% raises, and puts away 14% of pay on average will have $547,000 by age 55—a hefty sum that with continued contributions will double to $1.1 million by 65, assuming 6% annualized returns. Do the same starting at age 35, and you’ll reach $812,000 at 65.

Yet saving aggressively from the get-go is a tall order. You may need several years to get your savings rate up to the max. Stick with it. Increase your contribution rate with every raise. And picking up part-time or freelance work and earmarking the money for retirement can push you over the top.

Milk your employer. For Fidelity 401(k) millionaires, employer matches accounted for a third of total plan contributions. You should squirrel away as much of the boss’s cash as you can.

According to HR association WorldatWork, at a third of companies 50% of workers don’t contribute enough to the company 401(k) plans to get the full match. That’s a missed opportunity to collect free money. A full 80% of 401(k) plans offer a match, most commonly 50¢ for each $1 you contribute, up to 6% of your salary, but dollar-for-dollar matches are a close second.

Broaden your horizons. As the graphic below shows, power-saving in your forties or fifties may bump you up against your 401(k)’s annual limits. “If you get a late start, in order to hit the $1 million mark, you will need to contribute extra savings into a brokerage account,” says Dirk Quayle, president of NextCapital, which provides portfolio-management software to 401(k) plans.

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Money

2) Act Like a Company Lifer

The Fidelity 401(k) millionaires have spent an average of 34 years with the same employer. That kind of staying power is nearly unheard-of these days. The average job tenure with the same employer is five years, according to the Bureau of Labor Statistics. Only half of workers over age 55 have logged 10 or more years with the same company. But even if you can’t spend your career at one place—and job switching is often the best way to boost your pay—you can mimic the ways steady employment builds up your retirement plan.

Here’s how to do it:

Consider your 401(k) untouchable. A fifth of 401(k) savers borrowed against their plan in 2013, according to EBRI. It’s tempting to tap your 401(k) for a big-ticket expense, such as buying a home. Trouble is, you may shortchange your future. According to a Fidelity survey, five years after taking a loan, 40% of 401(k) borrowers were saving less; 15% had stopped altogether. “There are no do-overs in retirement,” says Donna Nadler, a certified financial planner at Capital Management Group in New York.

Even worse is cashing out your 401(k) when you leave your job; that triggers income taxes as well as a 10% penalty if you’re under age 59½. A survey by benefits consultant Aon Hewitt found that 42% of workers who left their jobs in 2011 took their 401(k) in cash. Young workers were even more likely to do so. As you can see in the graphic below, siphoning off a chunk of your savings shaves off years of growth. “If you pocket the money, it means starting your retirement saving all over again,” says Nadler.

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Money

Resist the urge to borrow and roll your old plan into your new 401(k) or an IRA when you switch jobs. Or let inertia work in your favor. As long as your 401(k) is worth $5,000 or more, you can leave it behind at your old plan.

Fill in the gaps. Another problem with switching jobs is that you may have to wait to get into the 401(k). Waiting periods have shrunk: Today two-thirds of plans allow you to enroll in a 401(k) on day one, up from 57% five years ago, according to the Plan Sponsor Council of America. Still, the rest make you cool your heels for three months to a year. Meanwhile, 40% of plans require you to be on the job six months or more before you get matching contributions.

When you face a gap, keep saving, either in a taxable account or in a traditional or Roth IRA (if you qualify). Also, keep in mind that more than 60% of plans don’t allow you to keep the company match until you’ve been on the job for a specific number of years, typically three to five. If you’re close to vesting, sticking around can add thousands to your retirement savings.

Put a price on your benefits. A generous 401(k) match and friendly vesting can be a lucrative part of your compensation. The match added about $4,600 a year to Fidelity’s 401(k) millionaire accounts. All else being equal, seek out a generous retirement plan when you’re looking for a new job. In the absence of one, negotiate higher pay to make up for the missing match. If you face a long waiting period, ask for a signing bonus.

3) Keep Faith in Stocks

Research into millionaires by the Spectrem Group finds a greater willingness to take reasonable risks in stocks. True to form, Fidelity’s supersavers have 75% of their assets in stocks on average, vs. 66% for the typical 401(k) saver. That hefty equity stake has helped 401(k) millionaires hit seven figures, especially during the bull market that began in 2009.

What’s right for you will depend in part on your risk tolerance and what else you own outside your 401(k) plan. What’s more, you may not get the recent bull market turbo-boost that today’s 401(k) millionaires enjoyed. With rising interest rates expected to weigh on financial markets, analysts are projecting single-digit stock gains over the next decade. Still, those returns should beat what you’ll get from bonds and cash. And that commitment to stocks is crucial for making it to the million-dollar mark.

MONEY 401(k)s

Here’s How to Tell If You’re Saving Enough for Retirement

This month's MONEY poll looks at our habits when it comes to retirement savings. Click through the gallery to see how you compare with your fellow readers.

  • Men Have Bigger Balances

    Money

    But women are 10% more likely to enroll in a workplace plan, and they save at higher rates (up to 12%) than their male colleagues.

  • Most of Us Will Save More This Year

    150318_RET_NestEgg_Slideshow_2
    Money

    In a poll of more than 500 MONEY readers, the majority said they’d put away more for retirement this year than last year.

  • How Much We’re Socking Away

    Average 401(k) contribution in 2014
    Money

    The average 401(k) contribution last year was up 15% from 2009.

  • What We’ll Be Living On in Retirement

    For most people, Social Security will account for a substantial portion of income in retirement.

  • Trending in the Right Direction

    150318_RET_NestEgg_Slideshow_6
    Money

    401(k) balances topped out at a record $91,300 at the end of 2014, according to Fidelity.

  • But Still Not Good Enough

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    Money

    The Natixis Global Retirement Report ranks the U.S. 19th, behind Australia (3), Germany (9), and Japan (13), but ahead of the United Kingdom (22).

  • The States That Save the Most

    150318_RET_NestEgg_Slideshow_4
    Money

    San Jose—home to many well-paid high-tech workers—leads the nation in 401(k) participation. Bringing up the rear: El Paso, Texas, where workers save just 5.7% of salary.

  • Are You Saving Enough?

    150318_RET_NestEgg_Slideshow_8
    Money

    The average employee is saving just over 8%, the highest rate in the past four years.

MONEY retirement planning

Money Makeover: Married 20-Somethings With $135,000 in Debt—And Roommates

The Liebhards
Julian Dufort

A young couple gets some advice on how to save for the future even while saddled with loads of student debt.

Samantha and Travis Liebhard, both 24, met as college freshmen, married right after graduating in 2012, and quickly moved to Minneapolis so that Travis could start his graduate pharmacy program at the University of Minnesota—Twin Cities.

They face intimidating debts: Travis has racked up $135,000 in student loans and expects to incur another $60,000 before graduation. Barely making ends meet this year, the couple came up with an idea: Why not cut their $1,500 monthly rent in half by giving up their big two-bedroom apartment and finding room­mates to share a similarly priced four-bedroom unit?

So in September, two of Travis’s classmates moved in with the Liebhards. Now Samantha’s $40,000 salary in her public relations job and Travis’s $8,000 pay from a part-time hospital job seem like enough to get by on. Samantha complains about dishes in the sink and clothes left on the floor, but the four roommates get along well. “It’s helping me prepare to have children one day,” she jokes.

Retirement seems far away, given the Liebhards’ more urgent financial concerns, starting with the student debt. The couple also want to have kids and buy a house, but Travis won’t be making a full pharmacist’s salary of about $120,000 for another four years; after his expected graduation in 2016 comes a two-year residency, paying about $40,000 annually.

The Liebhards don’t know whether to save for re­tirement now or just focus on their debt. So far the couple have only $2,000 in the bank and $3,200 in retirement accounts. Samantha wants to get serious about saving for retirement, but Travis isn’t sure: “It’s hard for me to even think about retirement until we can real­ly do something about it.”

Helping the Liebhards navigate their options is Sophia Bera of Gen Y Planning in Minneapolis. The key to success, she says, is to have a reasonable spending plan and take incremental steps.

The Advice

Save in moderation: Given how much Travis owes, plus the 6.8% interest rate on most of his loans, repaying debt should indeed be the couple’s top priority, says Bera. So for now Samantha should only bump up her 4% 401(k) contribution to 6%—enough to get her full match. Her 401(k) portfolio—half in a 2020 target-date fund and half in a large-cap U.S. stock fund—is too conservative for her age and not properly diversified, says Bera. Her plan’s 2050 target-date fund, which is 80% in stocks, would be a better choice.

Bank some cash: Because the Liebhards have little saved for emergencies, Bera says they should put Travis’s $800 monthly pay­check­—the amount they are saving in rent—into a savings account; the goal is for that to reach $10,000, or three months of their net pay. Next, they need to budget Samantha’s $2,600 monthly take-home pay. Bera suggests $800 for the fixed costs of rent and phones, and $1,500 to be divided between discretionary spending and monthly essentials such as groceries.

Attack the debt: The $300 left over in Bera’s proposed budget should go toward paying down interest on Travis’s debt, even though he can defer repayment until after his residency; his current loans are accruing interest amounting to about $7,000 annually. Their payments will likely qualify the couple for an annual $2,500 student loan interest tax deduction over the next few years. Once Travis finishes his residency, Bera says, he should be able to pay off his loans in 10 years at the rate of $2,300 a month, while maxing out his 401(k) contributions ($17,500 is the current annual limit).

Though the Liebhards needn’t have roommates for­ever, says Bera, they should hold off on buying a home. “If you have student loans the size of a mortgage, you should avoid taking out a mortgage,” she says. Samantha is not so sure. “We can wait a few years after Travis graduates,” she says, “but once we have a child who’s able to walk, we’d like to have a place bigger than an apartment.”

More Retirement Money Makeovers:
4 Kids, 2 Jobs, No Time to Plan
30 Years Old and Already Falling Behind

MONEY retirement planning

Money Makeover: 30 Years Old, and Already Falling Behind

When she turned 30, Chianti Lomax had an epiphany: Her salary and savings weren't enough to buy a home or start a family. MONEY paired her with a financial expert for help with a plan.

Chianti Lomax grew up poor in Greenville, S.C., raised by a single mother who supported her four children by holding several jobs at once. Inspired by her mom, Lomax worked her way through high school and college; today, the Alexandria, Va., resident makes $83,000 plus bonuses as a management consultant.

But turning 30 last December, Lomax had an epi­phany: Her career and her 401(k)—now worth $35,000 —weren’t enough to achieve her long-term goals: raising a family and buying a house in the rural South.

Her biggest problem, she realized, was her spending. So she downsized from the $1,200-a-month one-bedroom apartment she rented to a $950 studio, canceled her cable, got a free gym membership by teaching a Zumba class, and gave up the 2010 Honda she leased in favor of a 2004 Acura she paid for in cash. With those savings, she doubled her 401(k) contribution to 6% to get her full employer match.

And yet, nearly a year later, Lomax has only $400 in the bank, along with $12,000 in student loans. Having gone as far as she can by herself, Lomax wants advice. As she puts it, “How can I find more ways to save and make my money grow?”

Marcio Silveira of Pavlov Financial Planning in Arlington, Va., says Lomax is doing many things right, including avoiding credit card debt. Spending, however, remains her weakness. Lomax estimates that she spends $500 a month on extras like weekend meals with friends and $5 nonfat caramel macchiatos, but Silveira, studying her cash flow, says it’s probably more like $700. “That money could be put to far better use,” he says.

The Advice

Track the cash: Silveira says Lomax should log her spending with a free online service like Mint (also available as a smartphone app). That will make her more careful about flashing her debit card, he says, and give her the hard data she needs to create a budget. Lomax should cut her discretionary spending, he thinks, by $500 a month. Can a young, single person really socialize on $50 a week? Silveira says yes, given that Lomax cooks for herself most evenings and is busy with volunteer work. Lomax thinks $75 is more doable. “But I’d like to shoot for $50,” she says. “I like challenging myself.”

Setting More Aside infographic
MONEY

Automate savings: Saving money is easier when it’s not in front of you, says Silveira. He advises Lomax to open a Roth IRA and set up an automatic transfer of $200 a month from her checking account, adding in any year-end bonus to reach the current annual Roth contribution limit of $5,500, and putting all the cash into a low-risk short-term Treasury bond fund.

Initially, says Silveira, the Roth will be an emergency fund. Lomax can withdraw contributions tax-free, but will be less tempted to pull money out for everyday expenses than if the money were in a bank account. Once Lomax has $12,000 in the Roth, she should continue saving in a bank account and gradually reallocate the Roth to a stock- heavy retirement mix. Starting the emergency fund in a Roth, says Silveira, has the bonus of getting Lomax in the habit of saving for retirement outside of her 401(k).

Ramp it up: Lomax should increase her 401(k) contribution to 8% immediately and then again to 10% in January—a $140-a-month increase each time. Doing this in two steps, says Silveira, will make the transition easier. Under Silveira’s plan, Lomax will be setting aside 23% of her salary. She won’t be able to save that much upon starting a family or buying a house, he says, but setting aside so much right now will give her retirement savings many years to compound.

Read next:
12 Ways to Stop Wasting Money and Take Control of Your Stuff
Retirement Makeover: 4 Kids, 2 Jobs, No Time to Plan

MONEY

The Secret Weapon To Early Retirement: Your Home

2013 Getty Images

The housing market’s recent recovery may be one of the things that’s giving you the confidence — and the wherewithal — to retire ahead of schedule. Home prices in 20 major metro areas are up 12% over the past year, the biggest gain since 2006, according to the widely followed S&P/Case-Shiller home price index.

In seven of those markets, values are higher than or nearing their pre-crash peak, says David Blitzer, managing director at S&P Dow Jones Indices. American homeowners have seen their equity rise more than $2 trillion in just the past year, according to the Federal Reserve.

Alas, you can’t count on a housing boom to keep padding your net worth. With rising mortgage rates and tepid economic growth, the pace of price gains is expected to slow. “A year from now home prices will be higher, but half the double-digit gains we’ve seen,” says Blitzer.

You need to set realistic expectations for what your home can do for you, and plan prudently with what you have. That might mean leaving your old digs behind.

What to do

Lose two bedrooms. Moving out of your home of decades can pay off in two ways. By selling into a strong market now and buying a smaller house, you can lock in your good fortune, letting you add to your savings or wipe out any lingering debts.

Related: How much house can you afford?

Plus, if retiring early means learning to live on less, there’s no better way to do that than to cut your housing costs, which typically eat up 40% of retirees’ budgets, according to the Consumer Expenditure Survey.

Get out of town. Only 10% of retirees pick up stakes, though boomers look to be a bit more likely to relocate than previous generations were. In a 2012 AARP survey, two in 10 boomers said they planned to move in retirement.

“Boomers are different,” says Fred Brock, author of Retire on Less Than You Think. “They are willing to move to cheaper parts of the country.” With families more mobile, he adds, you don’t need to be tied to one place to stay near your kids.

Join this minority and move to a town with lower property taxes and lower living costs, as well as cheaper homes, and you can leverage your profits even more. That’s what Sheri and Bill Pyle did when they sold their three-bedroom Cape Cod outside Chicago for $185,000, paid cash for a $128,000 four-bedroom ranch in Tennessee, retired a home equity line and car loan, and added $30,000 to their savings.

And though their income is less than 40% of the $126,000 they used to earn, their cost of living is so low that they are able to get by on their combined Social Security, leaving their $400,000 in retirement savings to grow for now.

Their property taxes plummeted from $7,000 to $500 a year. Milder winters mean their heating bills are a third of what they used to pay. “We could never have done it if we stayed in Chicago,” says Sheri.

Beware the trap of leisure fees. Whether you downsize locally or across the country, it’s crucial that you don’t simply trade maintenance costs for steep association fees.

“I see a lot of people who move into a new home for retirement, and their cost of living goes up, not down,” says Colorado Springs financial planner Linda Leitz, national chair of the National Association of Personal Financial Advisors.

When Gundy and Karen Gunderson retired in 2007, the Seattle couple bought a home in a gated country-club community in Las Vegas. But they were surprised at how quickly the costs added up. Gundy, 66, a former commercial airline pilot, and Karen, 67, a homemaker, estimate they were spending $1,000 a month on dues for the private golf course, tennis and fitness classes, the club’s restaurant minimum, and maintenance on their pool and lawn.

“We ran the numbers and knew we had to make an adjustment if we wanted our money to last,” says Gundy. So this year they downsized a second time, to a Henderson, Nev., retirement community overlooking two public golf courses. Now all they pay is a $93 monthly association fee.

Invest in staying put. All this said, what if you really don’t want to leave your home? At a minimum, early retirees told us they avoided carrying a mortgage into retirement, as 30% of retirees do.

While you’re still working, invest in improvements that will cut costs later, like replacing old appliances and drafty windows and upgrading your heat and electrical systems. “If you’ve been in your home a long time, there’s a lot you can do to make it less costly,” says Stillwater, Okla., financial planner Louise Schroeder.

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