How to Stretch Your Savings to Last Longer After Retirement - Retirement Planning

The golden rule of retirement planning is straightforward – the earlier you begin, the more comfortable a life you can lead. This is especially true if your dream is to retire early. However, with market prices being as volatile, even the most carefully devised strategies can fall by the wayside, leaving you with a smaller nest egg than you hoped for.

In addition to financial unpredictability, increasing life expectancy is another reason one’s retirement savings might fall short. That’s why it is important to have a contingency plan in place, one which goes beyond investments and Social Security. This can involve several feasible ways to optimize your savings to their highest potential and continue to live the happy, stress-free life you have built. If you wish to learn different ways to make your retirement savings last, reach out to a professional financial advisor who can advise you on the same.

Here are eleven ideas designed to help you keep saving money after retirement without giving up too much of your comfort and independence.

1. Downsize your space

Downsizing can be a good option if you are uncertain about your retirement savings lasting you through the rest of your life. It can be a great idea for retirees, especially if you move into a close-knit community that takes care of elders. You can get help with simple chores as well as be a part of a friendly social circle with folks your own age. The most obvious benefit of this move is better management of your finances. You will be spending much less on expenses like house maintenance, utilities, property taxes, and so on, leaving you with more to save and spend on activities you enjoy. Larger homes also mean higher premium amounts for your home insurance plan. Buying a smaller new home will not only help you save on these costs, but the condition of a well-built property will also result in lower insurance rates. If you own rare or vintage items, you can put them up for auction, too. You can also sell your extra cars. Unless you’re still living with your children or other relatives, it’s possible you can get away with using one car. Selling a vehicle will allow you to save on premium for auto insurance as well as money spent on gas.

When downsizing, pay attention to the tax structure of your state. Some states charge lower taxes than others. Alaska, Florida, Nevada, and South Dakota are among the most tax-friendly states in the country, whereas California, Hawaii, New Jersey, Oregon, and New York are among the highest tax-paying states. If possible, consider moving to a tax-friendly state to save money.

2. Re-evaluate your life insurance policy

The choice of buying some types of insurance can be a personal one as it depends on your needs at the time. People need higher coverage in the early stages of their careers when they typically begin to think about marriage and kids. Once they’re grown up and on their professional journey, you can consider lowering the coverage amount, which will result in decreased premiums.

However, this strategy is recommended only if you are debt-free, don’t have any income to substitute, and your kids, as well as your spouse, are self-sufficient. Those who fit this description can certainly reduce their coverage and steer clear of overpaying. Your life is still protected with basic benefits that you do need, all factors considered. Talk to the insurance company about how to save money when you are retired, and they may be able to help you customize a coverage policy that works in your favor.

3. Embrace senior discounts everywhere

Whether you are booking travel tickets to your dream destination or heading out for a movie, some places offer senior citizen discounts. If you are over 50 years of age, you can sign up with the American Association of Retired Persons (AARP). It provides members with great discounts on services like travel, insurance, auto rental, and many others in the United States. This step is vital because a lot of places don’t advertise their offers too loudly, and AARP negotiates on your behalf to help you avail them.

In the same vein, there’s an array of other perks to look forward to. Tax deductions for people over 65, bigger limits on the retirement account, no penalty for early withdrawals from your IRA, and discounts on public transport are just a few of them. Don’t hesitate to ask for offers. You will end up saving an impressive amount every month while living your life to the fullest.

4. Try to make budgeting a habit

When you are living on a fixed income derived from your Social Security benefits, pension checks, dividends, or any other monthly investment returns, the need to plan for expenses continues to exist even after you’ve retired. If you’re wondering how to save money on a fixed income, one of the first tools in your drawer is your foresight.

Create a spending plan depending on your income for each month, and try your best to stick to it. This includes prioritizing your needs and going slow on things you can’t afford, such as frequent vacations or eating out every day. A budget helps you create room for leisure while taking care of essentials like bills and insurance payments.

Consulting with a financial advisor is a smart way of increasing the number of ways in which you can cut down on costs. They will advise you on how to decrease your insurance coverage to need-based, save on your retirement tax bill, and bring monthly costs down at the same time. In short, you’ll have a better idea of how to make your money stretch for the remaining years of your life.

5. Hold off on drawing Social Security benefits

In the United States, delaying the benefits of your Social Security can leave you with more money to withdraw later. For those born in or after 1943, the law states that for every year after retirement that you choose not to withdraw from the account, your benefits go up by 8% until you reach 70 years.

This makes sense if you have sufficient savings to last you till that age or make enough from various avenues like part-time jobs and investment returns.

6. Take extra care of your health

Hitting the age of retirement can come with a lot of minor and major health concerns. With rising costs of healthcare around the country and a significant uptick in life expectancy, age-related issues might wreak as much havoc on your bank account as on your physical and mental well-being. According to a recent study, couples in America who retire at 65 will typically spend over $660,000 on healthcare in their retirement years. That’s a whopping number, and while it may not be possible to avoid every expense, maintaining a healthy lifestyle can go a long way in curbing the need for medications, doctor visits, and trips to the hospital.

Buying a good health plan at a younger age is also a must for everyone, as insurance rates tend to see huge upticks the older you get. Medical inflation is a very real concern in the United States, with costs increasing by 6% in 2022. If you have a policy that covers critical illnesses, medical expenses after the age of retirement will automatically be much lower than without the right coverage.

7. Travel during off seasons

Here’s a good old-fashioned tip for saving money, regardless of age. There is a world of difference between traveling across the country during the on season and off. While this might depend on the destination, flight and hotel prices tend to be relatively less expensive and you get to explore the place in peace.

Also, don’t forget to take advantage of all frequent flyer miles you may have earned over the years. Many airlines offer senior discounts to select places around the world, so be sure to check for the same before booking your next vacation. Credit card points are another great resource to find attractive discounts on travel, dining, and shopping.

8. Consider taking a part-time job

Working on a part-time basis allows you to supplement your savings, Social Security, and other income sources so you can keep that emergency fund intact for an actual rainy day. Moreover, if you have debt, this is the smartest way of paying it off without dipping into your nest egg. And finally, continuing to participate in your community and forming social connections is a wonderful way of maintaining emotional as well as mental well-being. Some amount of work in retirement has been associated with lower stress and heart-related risks along with longer lifespans.

If you are concerned about your savings and keep wondering “how long my money will last”, look up part-time jobs for retirees in your area and you will find hundreds of results online. Caregivers and registered nurses are perpetually in demand, while jobs like career coaching, skill teaching, and nutritionist are gaining traction among the retired.

9. Maintain a diversified investment portfolio

Having a healthy balance of equity and debt instruments in your financial portfolio gives you the benefits of growth with stability. Younger investors can afford to take a riskier approach and opt for stocks over bonds, but as you get older, you want to play it safe. Investing in hybrid mutual funds is a good idea for long-term returns. Similarly, bonds can be an option for those who are looking for fixed-income avenues and tax-efficient returns.

10. Delay retiring by a few years

This sounds counterintuitive, but if you have a considerable gap in your expenses versus income as retirement lurks around the corner, delay your retirement to fill the gap as much as possible. Even a two-year delay can reduce the chances of outliving your savings, not to mention keep you secure under employer insurance. This way, you can also keep making contributions to your Individual Retirement Account (IRA) and 401(k), giving you more time and money for the inevitable transition to a retired life.

11. Take advantage of public benefits

Medical assistance, transportation, care assistance, and senior care services are all available once you know where to look. The National Council on Aging, the Social Security Administration, and the Medicare Savings Programs offer free government benefits for people over the age of 65, each of which can provide financial aid and help you manage the costs of healthcare.

To conclude

Saving for retirement is a serious commitment that demands a certain level of compromise. However, with millions of Americans retiring each year with a smaller nest egg than required, the consequences of not having a plan can be bleak and worrisome. But there is a silver lining. If you haven’t gathered a significant corpus as you get close to retirement, it is never too late to start. You can follow the strategies discussed herein, and know exactly how to save money and make it last after retirement.

For more tips and advice on preparing a comfortable retirement corpus, you can also get in touch with a financial advisor. 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.