You may need less replacement income than you thought.
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"Retirement changes everything," could be our mantra. But not all changes are bad. So relax, enjoy living your life and know that yes, while you will have less to spend in retirement, you may also have less need to spend it.

1. You will actually save money in certain small ways.

No more dry-cleaning bills for work clothes. No more $16 salads when the office lunch bunch wants to eat out at the trendy eatery. No more gas or wear-and-tear on your car to get to work, or if you use public transit, no more commuting expenses. No more credit card bills that knock you to the ground when you see how much you've spent on take-out dinners because you were too tired to cook after work.

Let's just pick one: How much are office lunches costing you? A survey of 2,033 people by Visa taken in July and August put the price tag at almost $3,000 a year. While eating out costs $11 per meal, it’s only $6.30 on average if you prepare it yourself. And that cuppa Joe that you get at Starbuck's each morning on the way to work? Upwards of $1,000 a year. Yeah, that's money you won't be spending any more.

2. And in some big ways too.

One of the best things about being retired is you won't have to save for it any more. Think about it: A good chunk of your income is (hopefully) being set aside for your retirement. Once you retire, you won't be contributing to your 401K anymore. This is one of the reasons financial planners say you only need to replace 80 percent of your pre-retirement income. FWIW, T. Rowe Price found that three years into retirement, people were spending about 66 percent of their pre-retirement income -- and feeling just fine about it. "57 percent report they live as well or better than when they were working. And 85 percent agree with the statement, 'I don't need to spend as much as I did before I retired to be satisfied'," said the report.

3. You can probably drop your life insurance.

Life insurance was a necessary protection when you were working; if you died, it would have replaced your income and not left your family high and dry. But you have no income in retirement to replace. And there's an excellent chance you've paid off your big debts -- mortgage -- before you retired. It's time to ask whether you still really need it.

4. Ditto for disability insurance.

Disability insurance replaces lost income if you’re no longer able to work. But since you aren't working ... same deal.

5. The taxman is friendlier to retirees.

There’s a good chance at least some of your retirement income won’t be taxable. Money drawn from a Roth IRA in retirement, for instance, is tax-free. (Once you've put enough into your 401(k) to get the full company match, consider diverting to a Roth IRA.)

Your income from Social Security is only taxed if you have substantial income from other sources as well. And even at that, it’s only partially taxable and you won’t pay federal taxes on more than 85 percent of your benefit.

Your 401k and IRA distributions are taxable, but your income from those sources will likely be lower than what your paycheck was.

Before You Go

Abilene, Texas

Forbes Best Places To Retire 2016

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