Many Americans intend to keep working after they have retired. This is because more people are retiring with less savings than they need to be comfortable.
This means more than half of American retirees may not be able to take care of themselves during retirement.
Given that the life expectancy of the average American is 79.5 years, this implies that many retirees would live for another decade depending on their retirement fund without any source of income.
As such, you need to make sure that you have built a sizeable nest that would cater to your needs when you are no longer eligible for the labor market.
One way of ensuring that you have sufficient funds for retirement is to identify unnecessary expenses that could take a chunk out of your savings. In this article, we look at ways you can save more money in retirement.
Many people intend to see the world once they are retired. They wish to catch up on the pleasures they missed while working a 9 to 5. However, taking trips abroad could also be an expensive venture if not carefully planned. One option is limiting the number of trips you embark on.
You could also take advantage of the strong dollar and travel to locations that are less pricey than popular destinations like Paris, Rome, or Hawaii. You can opt for vacation spots in Eastern Europe or Asia. Also, while on vacation, it's best that you live like a local if you intend to save some money.
When you travel, choose locations based on cost-efficiency. Rather than go to Paris, Hawaii, or other exotic locations, you can either choose vacation spots in Eastern Europe or Asia.
Another way to save money on travel is living like a local. Rather than eating at fancy restaurants or booking expensive hotels, you can live in a modest apartment and frequent the same restaurants that locals do.
Also, if you want to travel, try scheduling your trips during off-peak periods is a way to save on your travel costs.
Working couples sometimes require two vehicles get to and from their workplaces. However, if you and your spouse can organize your schedules, there is no need having two cars sitting in the driveway.
First off, having one car saves money on gas which is incredibly expensive now. It also costs less in terms of insurance and maintenance. If you are not monetizing the second car, you are better off selling one and adding the proceeds to your retirement nest.
Eating out also offers certain benefits when you are retired. It is more convenient plus it is an avenue for networking with other people. However, in the long term, the benefits of cooking outweigh the convenience that comes with eating out.
Cooking at home allows you to learn new things and stay occupied during your retirement. It can also be a source of self-fulfillment knowing that you can do something with your own hands.
Plus, it is much easier to keep track of your diet and stay healthier when you cook at home. Most of all, it is cheaper in the long run which is beneficial for those that want to save money while retired.
Retiring with debt is a huge financial misnomer. Every dollar you owe sets you up for a less blissful retirement. Liabilities such as credit card debt, mortgage, and student loans take huge drawdowns on your retirement fund.
The number of workers age 75 and older is expected to increase in the US by 96.5%, according to a 2021 survey from the Bureau of Labor Statistics. By 2040, the US population of adults ages 65 and older is expected to increase to 80.8 million from 54.1 million in 2019.
With the cost of living continually going up, thus making it more difficult for people to retire, eliminating your debt burden before retirement is one of the best things you can do.
While you are still working, you should prioritize debt reduction before retirement savings. Pay off your high-interest loans first, but do not leave the low-interest loans running into your retirement.
If you are on a mortgage, try and finish the payments and own a house. Who knows? You may need to take out a loan against your house while you are retired.
Health care expenses take a huge chunk out of your nest egg. In a recent Principal survey, 64% of workers cited healthcare costs in retirement as a factor that's preventing them from feeling financially secure about the future.
While it is difficult to estimate your health costs, you can start by living a healthier life. Do away with habits that have negative effects on your health in the long term.
If you can't, the alternative is building emergency savings for your health care. You can invest this amount in low-risk assets that mutual funds or bonds so that your money accrues interests over time.
Having your portfolio managed by a professional can incur costs like management fees and commissions.
Given that you have more than a decade to live after you are retired, investment costs could be a drag on your portfolio if left unattended.
As such, it is worthwhile to review your portfolio to reduce your investment costs. You can do this by taking note of the expense ratio of each fund and challenging yourself to find a lower-cost fund that meets your investment needs.
Also, take time to learn ways you can withdraw from your retirement account without attracting penalties of taxes.
For those 65 and older, there are tax incentives that include a higher standard deduction. Additionally, there are tax benefits for senior homeowners in several areas.
Plan your retirement account withdrawals wisely to further lower your tax burden. More money in a 401(k) can be deferred from income tax payments by retirees who are still employed than by younger workers.
Retirees who have a heart for charity can make qualifying charitable gifts to avoid paying income tax on their IRA-required minimum distributions.
Cutting expenses during retirement starts before you are retired.
Reducing /eliminating your debt burden, building a health emergency fund, or reducing your traveling gives some wiggle room to save more money for your retirement.
It also takes some form of adjustment. Since you would not be working, it is expedient to adjust your lifestyle to suit your condition. This can be challenging considering that you have already established a pattern while working.
The key is being mentally prepared for the inevitable life-changing process that comes with retiring.
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