4 Household Expenses You Should Never Pre-Pay in Retirement
You might think locking in a rate saves you money, but financial flexibility is the real secret to keeping cash in your pocket.
Retirement is supposed to be carefree and financially predictable, but that doesn't mean you're exempt from recurring bills. That's particularly true if you own a home. Everything from maintenance to insurance comes at a cost. How you pay those bills — all at once or over time — can have a big impact on your savings and cash flow.
The secret to saving money is timing. Some annual expenses offer discounts if you lock them in early, while others are best kept flexible so you can shop around or keep your money earning interest.
To help you figure it out, here are four everyday bills you should wait to pay to save some serious cash.
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4 bills retirees should not prepay
1. Heating oil
For retirees who value predictability, locking in heating oil rates ahead of winter provides peace of mind amid volatile energy markets, but they typically pay extra for that relief.
A fixed-rate plan locks in your price for the entire season, protecting you from cold-weather price spikes. But you won't benefit if market prices drop. A capped-price plan sets a ceiling and lets you pay lower rates if prices fall, but dealers usually charge an upfront protection fee for that option.
The cheapest option, according to nonprofit consumer energy groups and state agencies, is a floating-rate plan. With that, you pay the current market rate and that's it. Over multiple years, those savings can add up.
2. Electricity
Just like heating oil, you can lock in your electricity rate for the year, but doing so can cost you if electricity rates decline.
Plus, you have to be careful of the fine print when signing up for a fixed-rate electricity contract. Some may have early termination fees, monthly recurring charges, and promotional rates that spike once the initial period expires.
3. Auto and homeowners insurance
Who doesn't love the convenience of auto-renewal for auto and homeowners insurance? It's one less thing to worry about, and doesn't loyalty always pay? It turns out it's better to shop around each year to ensure you're getting the best rates.
How much can you actually save? According to a LendingTree survey, drivers reported saving at least $100 per year simply by switching auto insurance providers.
4. Home warranty contracts
Home warranty contracts are supposed to protect you from expensive repairs. For a fixed annual fee, you won't have to worry if the furnace dies, a pipe bursts or the AC is on the fritz. Often, you get high service call fees, strict restrictions on what is covered and exclusions hidden deep in the fine print.
Instead of locking up money in a warranty contract that will require you to pay out of pocket anyway, put it in a high-yield savings account where your cash earns interest until it's needed for a repair.
Keep control of your retirement
Cash is king; it couldn't be truer in retirement, which is why patience pays off when it comes to some everyday expenses.
By shopping around annually and keeping your cash accessible in high-yield savings, you'll ensure your money stays liquid and under your control.
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