It’s no secret that retirement savings can be tough to stretch. In fact, a recent study found that many retirees run out of money before they die. If you’re looking for ways to make your savings last, you’re in luck! In this blog post, we will discuss some tips to stretch retirement savings. By following these tips, you can ensure that you have enough money to live comfortably in retirement.
The key is to make sure that your savings plan is flexible enough so that if something happens and your income changes, or if inflation forces prices up faster than expected and interest rates rise, your savings will still keep up with those changes.
- Retirement savings is a lifelong process, so you should start early.
- Make sure to invest in a diversified portfolio of stocks, bonds, and real estate.
- Consider your healthcare costs when planning for retirement; if you don’t have insurance through work, look into Medicare or Medicaid eligibility.
How can I stretch my retirement savings?
You’ve worked hard, and now you’re ready to retire. You’ve got your house paid off, and you want to be able to afford a few things when it comes time to retire. But how can you stretch your retirement savings? Here are some tips:
1) Get a side hustle. If you’re over 50, this might not be an option for you—but if you’re under 50, try getting a part-time job or doing freelance work on the side. Even if it’s just 10 hours a week, that extra income will go a long way toward helping you pay for things like travel and activities in retirement.
2) Buy used cars instead of new ones. This is one of the biggest ways people waste money on their car purchases—they buy new cars instead of used ones because they think it will make them look good or make them feel better about themselves when driving around town. It doesn’t! And if you buy used cars, then your retirement savings can last longer!
3) Don’t take vacations that cost more than $500 per person per trip (for two people). This is another big one for people who want to make sure their savings last as long as possible—by taking affordable vacations, you can free up money in your budget to put toward things like extra savings and investments.
20 Proven Ways to Stretch Your Retirement Savings
1. Stay as active and healthy as possible
We know it’s easier said than done, but staying active and healthy in retirement can actually make your money last longer. According to a recent study, people who are more fit tend to live longer, which means you’ll have more time to spend on your savings.
2. Delay Taking Social Security
Social Security benefits for retirement payments are enhanced by a percentage for each month you delay beginning benefits after reaching full retirement age. When you reach the age of 70, the benefits increase ceases.
Aside from that social security benefits can help you a whole lot. You need to understand the rules of social security in order to get the most out of it. It’s important to know when you can begin collecting benefits, how much money you are entitled to receive, and what other factors may influence your eligibility. Researching these topics thoroughly will help ensure that you make the best decisions when you claim social security.
3. Diversify your investments
Your retirement savings are one of the most important things you’ll ever have, and they’re something that will last you a lifetime. That’s why it’s so important to diversify your investments. If you put all your eggs into one basket, then if something happens to that basket, like a major stock market crash or economic recession, then you could lose everything.
Instead of doing that, try investing in different types of investments. For example, if some of your money is tied up in stocks and bonds, then put some money into real estate as well. This way if one investment fails, then others can pick up the slack and help protect your overall portfolio from taking too big of a hit. As with all investments, diversification is key.
4. Don’t dip into your retirement savings
If you’re not sure what to do with your extra cash, consider stashing it in a savings account instead of dipping it into your savings. It’s important to keep your emergency fund separate from your retirement money so that you can access it if and when you need it.
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5. Consider an annuity
Annuities, in general, provide security, long-term growth, and income. You have control over how much revenue you earn and how much risk you are willing to take. Annuities are a tax-deferred strategy to accumulate money until you are ready to receive retirement income. They are frequently used as insurance against outliving your retirement income.
6. Create a budget and stick to it
A lot of people think that creating a budget just means that you’re restricting yourself. But really, it’s just about knowing where your money is going each month and making sure that your spending aligns with your priorities. That way you can make sure that the money you do have can last as long as possible.
7. Rent out your property
Renting out your home is one of the smartest ways to supplement your retirement income. If you live in a large city, you might be able to rent out part of your place or even the whole thing! This can help fill the gaps in your budget that come with living on a fixed income.
8. Downsize as much as you can
When you’re ready to downsize, there are two options: selling your home and moving into something smaller, or renting a place and keeping your current home. If you have a mortgage, selling is usually the best option—but it’s also more expensive and time-consuming than renting. If you don’t have a mortgage and are willing to take on a tenant, renting might be the better choice.
9. Move to a less expensive area
If you’re living in one of the most expensive cities in the United States, there’s a good chance that you’ll need to downsize your lifestyle—and your housing costs—to make ends meet. But don’t worry: You can still live comfortably and enjoy yourself in an area with lower costs of living.
We recommend looking for an affordable retirement income community that provides all the amenities you need, including access to transportation, entertainment, healthcare services, and more.
10. Cut your expenses
If you’re looking to stretch your retirement income, the first thing you should do is take a look at your budget. Are there any expenses that can be cut? How about luxuries like cable TV and eating out? If you cut these things out of your life, you’ll be able to put more money toward retirement.
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11. Make catch-up contributions
Individuals aged 50 and up at the end of the calendar year are eligible to pay annual catch-up contributions. Annual catch-up payments of up to $6,500 in 2022 ($6,500 in 2021; $6,500 in 2020; $6,000 in 2015 – 2019) may be allowed by the following plans: 401(k) (other than a SIMPLE 401(k)) (k) this can help you manage your taxable income.
12. Consider a part-time job
If you’re not yet eligible for an employer-sponsored retirement plan, consider working part-time. When you work full-time, your earnings are taxed twice: once when they are earned and again when they are withdrawn from your 401(k). But when you work part-time, those earnings will only be taxed once.
13. Look for discounts
The more money you save money in your 401(k), the more valuable it is. That’s because you can take advantage of employer matching contributions and other perks, such as free financial planning or investment advice, or discounted insurance from a financial professional. When shopping for a job, consider how much your potential employer matches—and whether that match applies to all employees or just new hires.
14. Invest to keep up with inflation
Inflation is a sneaky little monster that can eat away at your retirement income. If you invest in a low-yield, non-inflation-adjusted account, your money will be worth less and less every year. But if you make sure to invest in a retirement account that grows with inflation, you’ll be able to keep up with its effects and preserve your purchasing power.
15. Develop a tax strategy
A tax strategy is a method for lowering taxes that applies to any business or investment scenario. It is more than simply hoping you could pay less tax. It is a plan designed to ensure that you pay the least amount of tax allowed by law.
16. Plan for healthcare costs
Healthcare costs are one of the biggest expenses we face in retirement, and it’s one that can be planned for. If you have a health savings account (HSA), you can use your savings to pay for healthcare expenses before you retire. If not, consider a Medicare plan that has a high deductible and low premium. That way, you’ll have more money in your pocket each month when it comes time to pay for healthcare costs.
17. Consider your long-term care options
If you’re not able to take care of yourself or have difficulty managing your finances, you may need long-term care. You can purchase a policy that pays for this care if needed and will pay out when it’s time to use it.
18. Stretch your healthcare dollars with an HSA
A health savings account (HSA) is one of the best ways to save for healthcare expenses. It’s a tax-advantaged account that allows you to contribute pre-tax dollars, grow your investment and use it tax-free when paying for qualified medical expenses. You can use your HSA to pay for things like doctor visits, prescriptions, and dental care.
19. Follow The 4% rule
The 4% rule is a simple guideline. In the first year of retirement, you can withdraw up to 4% of your portfolio’s value—even if it means withdrawing more than you’ve put in over the years.
20. Make Use of Catch-Up Contributions
Catch-up contributions allow adults over the age of 50 to save more in their 401(k)s and individual retirement accounts (IRAs) than the IRS’s standard annual contribution restrictions. The goal is to compensate for the years you did not save money, most likely while you were younger.
Stretch Retirement Savings FAQs
What expenses can be cut in retirement?
Cut out the lattes and other non-essential luxuries: If you’re constantly buying coffee out or splurging on a new pair of shoes every few weeks, it might be time to reassess whether these purchases should be considered essential.
Which is the biggest expense for most retirees?
If you’re a retiree, you might be surprised to learn that your biggest expense is still housing. That’s right—the price of your mortgage payments and any other associated housing costs (like property taxes, insurance, and maintenance) is the most expensive thing in your budget.
What is the 70% retirement rule?
The rule of 70 is a computation that determines how long it will take for your money or an investment to double given a certain rate of return. This indicator can be used by investors to analyze various assets, such as mutual fund returns and the growth rate of a retirement portfolio.
If you’re having a hard time transitioning through your retirement, I wrote something that can help you, make sure to read it here.
Retirement can be a great time in your life. However, it can also require some adjustments. You may have to adjust to a slower pace of work, adjust to living on a fixed income, and may even have to adjust to living alone if your spouse has died or isn’t able to live with you. Whatever the situation may be, there is nothing that says you cannot enjoy retirement! Just remember: take advantage of opportunities for personal growth, keep learning about your options for retirement income, attempt new things and meet new people.
With a few simple tips, you can make your money last longer and enjoy your golden years to the fullest. Give me a call or schedule a free consultation today, and I’ll help you create a retirement plan that’s right for you.