Financial experts advise clients starting to save for retirement from a young age. Not only does it give you more time to build a substantial retirement fund, but it also helps tackle market volatility over the long term. In addition, due to the increasing human lifespan, there is a risk that you may run out of money during the later years of your retirement. Hence, it is critical to start saving early and to have a contingency plan to help ensure your savings last you in retirement.
To build a substantial retirement corpus, you cannot simply rely on your investments and Social Security benefits. You must look for different ways to stretch your retirement savings and secure your financial future. Consider consulting with a professional financial advisor who can guide you through how to make your savings last through the later years of your retirement.
This article discusses different ways you can continue saving money after retirement and ensure you do not run out of funds during the latter years of your life.
11 tips to stretch your savings in retirement:
1. Consider downsizing your home
Downsizing is a good idea if you wish to reduce your expenses and are unsure about your retirement savings lasting through the later years of your retirement. You can also explore living in a retirement community that provides care for retirees. Not only will you receive help in carrying out your daily chores, but you will get to spend time with people your age in the community. Moving to a retirement community will help you better manage your finances and cut down on costs such as property taxes, maintenance costs, utilities, etc. Doing so would also allow you to save more money and spend time on activities you enjoy. Moreover, if you own a large home, it means you most likely have to pay a higher premium amount for your homeowner insurance policy. Downsizing your home would help lower your insurance costs as well.
A bigger home means a bigger garage, more furniture, and so on. You can sell your extra cars (if you have any) as well as put on sale any rare or vintage items owned by you. You can make do with one car unless you are still living with your children or other relatives. By selling your car, you can save the money spent on gas and paying auto insurance premiums. Another thing to consider when downsizing is the tax structure of the state you live in. Certain states such as Florida, South Dakota, Alaska, and Nevada charge lower taxes whereas Hawaii, New York, Oregon, California, and New Jersey are a few of the highest tax-paying states. Moving to a tax-friendly state can be a great way to save money.
2. Re-examine your insurance coverage
Taking out insurance depends on your personal needs as well as what you can afford financially. Typically, one requires higher coverage at the time of marriage and starting a family. Once your children have completed their education and have started working, you may consider lowering the coverage amount which will lead to lower premiums. That said, you should consider this strategy only if your children and your spouse are financially stable and can fulfill their needs and you are not burdened with debt. If you fall under this category, you can go ahead and lower your coverage amount to avoid overpaying for insurance. You can also reach out to your insurance company to learn ways to save money when you retire. See if your insurance provider can customize your policy based on your needs.
3. Make use of senior discounts wherever available
Many places offer discounts to senior citizens at the time of grocery shopping, booking travel tickets, at restaurants, or when you are going to the movies. You can start receiving senior discounts when you turn 50 if you buy a membership with the American Association of Retired Persons (AARP). The organization offers members discounts on multiple services such as insurance, pharmacy, auto rentals, travel, booking hotels, etc. in the United States. AARP negotiates on your behalf to help you avail of these discounts since most businesses do not advertise about them.
Apart from the above-mentioned benefits, seniors are eligible to avail of several other perks such as subsidized travel on public transport, tax deductions if you are 65 and up, penalty-free early withdrawals on IRAs, higher limits on retirement accounts with the help of catch-up contributions, and more. Maximize your savings with the help of these offers while living a quality, financially secure life.
4. Stick to your budget and cut down on your expenses
Budgeting becomes even more critical when you retire since you do not have a regular paycheck to bank on. At this point in your life, you are living off your Social Security benefits, retirement savings, dividends, pension checks, or returns from investments made by you. Start by creating a plan for your monthly expenses. Focus on meeting your essential expenses such as groceries, insurance payments, utilities, and more, and cutting down on eating out, frequent vacations, subscriptions to OTT services, etc. A budget allows you to cut down on frivolous expenses while leaving room to indulge in a few guilty pleasures.
You can also consult with a financial professional on different ways to lower your costs, save on retirement taxes, and decrease your monthly expenses while you are at it. The financial advisor can help you stretch your savings to last the remaining years of your life.
5. Delay claiming your Social Security benefits
You can start claiming Social Security benefits from the age of 62. However, each year that you delay drawing them, your benefits go up by 8% until you reach 70 years. You can consider this option if you have enough retirement savings or can work on a part-time basis to support your lifestyle. That said, claiming benefits early may seem prudent if you have an illness to contend with that and need the money to meet your health expenses.
6. Plan your healthcare expenses in advance
As you advance in age, you may face several minor and major health concerns. Due to the rising cost of healthcare, you need to create a well-thought-out plan that can help meet any expenses concerning any age-related issues that may crop up in the future. As per a recent study, retired couples of age 65 and above may end up spending over $660,000 on healthcare during the golden years of their life. Though you may not be able to avoid every expense, you can reduce the number of doctor visits, hospital trips, and the need for medications by following a healthy lifestyle.
You would also do well to buy a good health insurance policy when you are young since insurance rates tend to increase exponentially the older you get. Additionally, you need to take medical inflation into account. Insurance costs rose by 6.5% in 2022. A health policy that covers critical illnesses can go a long way toward reducing your medical expenses in retirement.
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7. Plan your trips and vacations during the off-season
You can save a considerable amount of money if you travel during the off-season. This tip is true for all people regardless of age. Flight and hotel rates tend to be less pricey. Plus you can explore the place in peace since fewer folks tend to travel during the off-season. You can also use the frequent flyer miles you may have accumulated over the years to go on vacations. Moreover, you can also take advantage of senior discounts offered by airlines to select places around the world to choose your next travel destination. Further, you can make use of credit card points to avail of handsome discounts on travel, shopping, making charitable donations, dining, earning cashback, and more.
8. Consider working on a part-time basis
By taking up a part-time job, you can boost your savings, Social Security, and other income sources. Doing so not only helps you keep your emergency fund intact but also pays off your debt (if you have any) without touching your retirement savings. Moreover, by taking up a part-time job, you can build social connections and stay active. This can help reduce stress and heart-related risks.
Further, it may be the case that some retirees may be unsure about their retirement savings lasting till the later years of their life. In this scenario, retirees can look for part-time jobs in their area. Usually, there are several part-time jobs available that they can look for such as caregivers, registered nurses, librarians, insurance sales agents, nutritionists, and more. These jobs are always in demand and popular among the retired.
9. Create and maintain a diversified investment portfolio
Diversifying your investments can help lower your risk by spreading it across different sectors, asset classes, and geographies. By maintaining a healthy mix of equity and debt options, you can benefit from steady growth and stable returns. As you grow older, you may look to go for safer investments such as hybrid mutual funds that assure long-term returns. You can also invest in bonds if you are looking for fixed-income options and tax-efficient returns.
10. Consider delaying retirement by a few years
This option can be explored by retirees in cases where there is a substantial gap between their expenses and retirement income. By delaying your retirement even for a few years, you can lower the likelihood of outliving your savings. In addition, you can keep making contributions to your retirement plans. This affords you more time and money to prepare for retirement.
11. Utilize government benefits, such as senior care services
The government offers several free benefits to people over the age of 65. You can take advantage of medical and care assistance, senior care services, and more through Medicare Savings Programs, the National Council on Aging, and the Social Security Administration. The programs offer financial assistance and can help manage healthcare costs for retirees.
To conclude
Saving for retirement requires discipline and a serious commitment. Each year, millions of Americans retire without having sufficient retirement savings. This is not ideal as you may not have enough money saved to live comfortably in retirement. However, it is never too late to build up your savings. You can also delay your retirement by a few years to boost your retirement income. Lastly, you can utilize the tips discussed in this article to boost your retirement savings and make it last through the non-working years of your life.
You can also get in touch with a financial advisor who can help guide you on how to stretch your retirement savings till the remaining years of your life. Use the free advisor match service to connect with 1-3 financial advisors based on your financial requirements. All you need to do is answer a few simple questions about yourself and the match tool will help connect you with advisors suited to meet your financial needs and goals.