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Growing Your Savings - Advice for Retirees

October 29, 2021

If you are thinking about retiring and looking over your finances, you may be wondering what changes you must make to adapt to a reduced income while still making your money work for you. Here are six practical tips for retirees and the soon-to-be-retired for growing your savings while fully funding your retirement.

1.   Find a Part-Time Job or Monetize a Hobby

If you are considering leaving your full-time job for retirement, think about what you might do to keep active and maintain a steady stream of income, however small. Many retirees use their lifetime of experience to work as retail greeters or in other public-facing capacities, such as reception. Other retirees start a business or monetize a hobby of theirs, such as woodworking, pet sitting, or crafts, among other business ideas. Still others are compensated for caring for their grandchildren while their parents work.

Whatever you decide to do to keep some money coming in, have fun with it, and do not commit to working too much. Retirement is meant to be enjoyed!

2.   Create and Stick to a Budget

If you have not followed a household budget before, the time to create one is now. You must know how much is coming in and how much you spend to control your financial situation and plan for and lead a comfortable life in retirement.

You’ve retired from your full-time job, so you no longer must pay the expenses attendant to that, such as:

       ●   Commuting costs
     Wear and tear on your vehicle
     Meals out while working
     Clothing
     Dry-cleaning
     Professional development    
    

Continuing aspects of your budget might include:

     Housing expenses (mortgage or rent, and insurance)
     Utilities
     Cable/internet/cell phone
     Fuel
     Car expenses (insurance, maintenance, fuel)
     Groceries
     Household supplies
     Personal Grooming
     Clothing
     Entertainment
     Travel
     Holiday gifts
 
 

Add all of this up and consider where you can cut back. Can you turn the temperature up in the summer and down in the winter? Do you need to eat out as much? Are you taking advantage of senior discounts and AARP discounts?

If you own or lease a car, now is the time to call your insurance company and let them know you are no longer commuting to work - you can get a discount for driving fewer miles annually.

If you still live in the family home and your children have moved out, consider downsizing. You may be able to cut considerable expenses for housing while gaining conveniences, such as an association to care for the grounds and snow removal, or single floor living, or proximity to amenities or a downtown area you enjoy.

These options are just the beginning. If you need more ideas, here are further tips for minimizing unnecessary expenses in retirement.

3.   Take Only the Minimum Annual Withdrawal from Your Retirement Accounts if You Can Afford It

Once you’ve cut back expenses where you reasonably can, and you’ve added up your remaining expenses, you need to figure out how to fund your lifestyle in retirement. Chances are, you will need more than the income from your part-time retirement job.

Most 401(k) and 403(b) accounts will have a minimum annual withdrawal starting at a certain age, for most, age 72. You must take the minimum each year to avoid penalties. Can you live on the minimum withdrawal plus the income from your part-time job? If not, consider that in general, it is safe to withdraw 4% of your retirement savings each year while preserving the total value of your account.

4.   Consider Delaying Taking Social Security Benefits as Long as You Practically Can

If you need to take Social Security as soon as you are eligible to retire, then that is what you need to do. However, consider that delaying Social Security benefits for a year or two or even just a few months is the most lucrative guaranteed investment you can make right now.

 Every year you delay taking Social Security past your retirement age, which is 66 for those born between 1943 and 1954, gradually rising to 67 for those born later, you make 8% more - guaranteed - up until age 70, at which point you will receive 132% of your benefits.

As an example, if your Social Security benefits were $1,000 a month if you started taking them at your retirement age, if you waited to take them until age 70, you’d collect $1,320 per month - almost a third again as much money, each month! Now that’s a way to grow your “savings.”

5.   Be Sure to Maintain Emergency Savings

This is a must for retirees. If all of your money is tied up in investments and retirement accounts and you do not have access to ready cash, you’ll have to use credit cards to fund emergency home repairs, medical expenses, or car repairs as they arise. This means you will spend much more than you should have to for an emergency in the form of interest.

If you have credit card debt, pay that off completely before starting to save for emergencies, otherwise, you will be passively spending money on the difference in interest between what you are making in savings and what you are paying the credit card company.

Conventional wisdom dictates that you should maintain six months’ worth of expenses in a savings account just in case. When an emergency arises - and they will! - you will be grateful to your past self for planning ahead.

It’s important to make sure that you are depositing in your emergency savings account regularly. A good goal is to save 10% of your income each month. Once you have fully funded your emergency savings and your other expenses are being met by your various sources of income, you might consider investing.

6.   If You Have Discretionary Income, Do Not Let it Sit in a Savings Account

If you have income beyond your living expenses and you have fully funded your emergency savings, it is time to make that money work harder for you than it would if you just continued to deposit it in your savings account. The way to do that is by investing.

Before the internet, an investor had to meet with a financial advisor to create a portfolio of investments. Today, you can invest directly without a middleman online increasing the options and convenience of your investments. However, it is important you are comfortable with your finances. If you need help, you can use a so-called “robo advisor” to invest for you according to your risk preferences. If meeting with a financial advisor helps with your personal security, this is the best option, but it is also important to be aware of other financial investing options and the freedoms they provide.

Individual investors can also get involved in commercial real estate investments online, a type of investing that was previously only available to accredited (high-worth) investors.

Another option is micro-lending. Micro-lending allows an individual to grant loans to other individuals instead of relying on banks to become approved. This investment opportunity is especially helpful if you are passionate about helping underserved communities.

Whatever you decide to invest in, make your discretionary income work harder than it would in your savings account, and you will have come out ahead. Best of luck in retirement!

While money is important in retirement, growing your savings is not everything. There can be many financial pitfalls during retirement, however, these mistakes are avoidable. Be sure to read five financial blunders to avoid when you retire to avoid these common mistakes.

 For tips and information regarding retirement plans, contact us.

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About the Author

Veronica Davis is a writer, blogger, and legal assistant living and working in the great city of Philadelphia. She frequently works with and writes for Chad Boonswang Esq., a Texas life insurance attorney.

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