Are you nearing retirement and worried about stretching your savings? With rising costs of healthcare, food and just about everything else, plus increased life expectancies, ensuring you have the funds to sustain your lifestyle during retirement is vital. It’s also very challenging.
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A recent GOBankingRates survey found that only 36% of respondents ages 65 and older have retirement savings of at least $100,000. Even worse is that nearly 24% don’t have any savings at all.
Fortunately, there are many ways to start saving more than you spend in retirement so that you can make the most of this next chapter in your life.
Create a Comprehensive Retirement Budget
Much like before you enter retirement, having a budget is critical to ensure you’re not spending more money than you should once you are retired.
“To ensure that I spend less than I save in retirement, I start by envisioning my ideal retirement lifestyle, factoring in travel, hobbies, and leisure activities,” said Alan Beard, managing director and CEO of Interlink Capital Strategies. “I calculate the total cost of this dream retirement, setting a clear target. Then, I work backward, actively seeking ways to reduce costs without sacrificing my desired experiences. This approach allows me to prioritize what truly matters while finding innovative ways to cut expenses, making every dollar count.”
Wait To Collect Social Security Benefits
Social Security benefits are available as soon as you turn 62. However, it can be more beneficial to wait before collecting these benefits. If you were born in 1960 or later, the full retirement age is 67, and that’s when you’ll receive 100% of your benefit amount. If you claim Social Security benefits before reaching 67, you’ll receive a reduced amount.
You can also choose to delay benefits even further and receive more. Each year you wait between 67 and 70, you’ll receive approximately an additional 8% in benefits.
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Implement a Tax-Efficient Withdrawal Strategy
Your entire working career was spent saving money so that you could enjoy your retirement. Once you enter retirement, it becomes necessary to plan how you will strategically withdraw your money.
“Instead of adhering to a fixed withdrawal plan, I adjust my distributions based on my annual tax situation,” said Beard. “For instance, in years with lower tax rates, I strategically increase my withdrawals, while in higher tax years, I minimize them. This tactical maneuver allows me to take advantage of favorable tax brackets, ultimately leading to less tax expenditure over the long term.”
Consider a Side Job
Even though you might have decided to retire from your full-time career, many retirees choose to take on a side job. For some, it’s because they want to stay active and involved in their community. Others want to use their retirement to work by doing something they love. For example, they may work at a golf course or a library.
If you choose to work during retirement, there are many benefits beyond staying busy. The added income can help supplement Social Security benefits and your other retirement savings. If you’re under full retirement age, you can earn up to $21,240 without having your Social Security benefits reduced. However, if you’re past the full retirement age of 67, you can earn up to $56,520 and still earn your full benefits.
Invest Wisely and Understand Your Investments
When you were younger, you probably had a more aggressive investment strategy. This allowed your portfolio to grow faster. In retirement, you still want your money to grow, but you’ll be more conservative to guard against downside risks.
“The retirement phase isn’t the end of your investment journey,” said Dominic James Murray, CEO and independent financial advisor at Cameron James. “In fact, smart investing can help your savings grow even during retirement. However, it’s essential to be cautious and invest in avenues you understand. Diversifying your investments, considering safer options like bonds or fixed deposits, and regularly reviewing your portfolio can help ensure that your savings not only last but also grow.”
Investing in retirement isn’t about capital preservation; it’s about capital appreciation.
Relocate
If you currently live somewhere with a higher cost of living, you could consider moving to a less expensive state. For example, someone who lives in New Jersey or Illinois pays some of the highest property taxes in the country. This can cost you thousands of dollars each year. If you moved to a state with low property taxes, like Colorado or Alabama, you could save a considerable amount of money.
The cost of housing isn’t the only thing that relocation will allow you to save on. Food, transportation and other expenses could be less expensive.
Use a Reverse Mortgage
A reverse mortgage won’t be a good fit for everyone, but it can help provide additional cash flow during retirement. A reverse mortgage allows you to borrow money against your home. You won’t make monthly payments, but instead the amount borrowed will be repaid once you sell the home.
Just be aware the interest is added to the loan balance each month, and the fees can be high.
The Bottom Line
Retirement is an exciting time in most people’s lives. You worked your entire life to be able to afford a comfortable one. Making intelligent choices will allow you to save more than you spend throughout your golden years.
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: 7 Ways To Save More Than You Spend in Retirement
