Disclaimer: This post is sponsored by PSECU, a Pennsylvania-based credit union.
Ah, the golden years, that magical time when people trade in their workers’ aprons and finally get to enjoy some much-deserved rest and relaxation.
However, one’s comfort level during retirement depends upon having an adequate nest egg. In the wake of the 2008 financial crash, many people dipped into retirement savings or increased the amount of debt they carried by taking out home equity lines of credit and the like. This means many seniors today experience a bit of anxiety when looking at their retirement funds, wondering if they will have enough to carry them through comfortably for the rest of their days.
Fortunately, techniques for continuing to grow savings even in the golden years exist, and people’s money can continue working long after the employee has hung up their hat. Here’s how.
Catch up on Your Contributions
Those 50 or older who remain in the workforce should take full advantage of the IRS rule allowing for catch up contributions to your 401(k) or IRA. Workers can contribute up to $6,000 per year without tax penalty. However, the vast majority of workers with 401(k)s can truly benefit from a retirement boost, as the contribution limit for those 50 and older changed to $24,000 per year, much more than the previous contribution limit.
Continue Paying Yourself
A long, long time ago, indubitably some economics instructor lectured on the importance of investing in savings even before paying other bills. Today, placing your savings goals on autopilot doesn’t even require a trip to the bank.
Those receiving direct deposits can simply call or log into their financial institution and direct them to divide income among checking, savings and investment accounts. Another tip — avoid linking debit cards to savings accounts. Merely having to drive to the bank to make a withdrawal versus hitting the ATM makes it easier to decline impulse purchases.
Avoid New Debts
Nothing can cut into retirement savings like high-interest credit cards that need paying each month. Avoiding new debt when nearing retirement should be a logical choice.
Unfortunately, too many people anxiously awaiting their retirement ages yield to the temptation to buy their dream car or take a no-expenses-spared vacation. While driving into the sunset in a shiny new Porsche sounds tempting, adding a $600 monthly payment may break one’s retirement budget. Try to resist the urge to splurge.
Consult Your Financial Planner
Your investing needs change as you age, and by the time you reach retirement age, dropping high-risk investments in lieu of lower-risk vehicles makes sense. By age 60, approximately 75 percent of any investment portfolio should consist of low-risk assets such as bonds. Contacting a qualified financial planner on an annual basis can help stretch nearly any retirement budget.
Have a Little Patience
Many people know waiting to retire means earning more in Social Security income, but holding off on pulling money from other retirement accounts may result in significantly increased gains. For example, those with $1 million in investment assets by age 60 can add another half-million dollars simply by waiting to retire until age 66, assuming a 6.5 percent return on investment.
Many retirees find themselves rattling about in homes meant for growing families, not those approaching their sunset years. Larger homes require more money to heat and cool, increasing annual costs of living significantly.
Given the current stability in the housing market, the time to downsize has come. Additional proceeds from the sale of an overly large property can pad any retirement budget, and the savings in heating oil, not to mention in property taxes, cuts expenses at the same time.
Make Money with Hobbies
The entire point of retirement means finally shaking off the mantle of work responsibilities and spending time doing what one loves. Some hobbies can generate additional retirement income.
Seniors savvy about fitness can seek Silver Sneakers instructor certification and take up teaching classes. Crafty seniors can create unique gifts to sell at local fairs. Animal lovers can open a pet-sitting business.
Stepping out of the workforce means increased loneliness for many seniors, and harnessing a hobby helps keep them involved in their community while providing extra money.
Finally Dig Those Discounts!
Don’t overlook the power of the senior discount! Just about every grocery store hosts a monthly senior day where those 55 or older receive an additional percentage off purchases. Use these days to stock the pantry.
In addition, many Medicare supplement plans come with free fitness memberships. Why not work out when it’s free? Movie theaters, bowling alleys and other entertainment venues likewise often offer senior discounts.
Just because a senior retires from the workforce doesn’t mean their money has to stop working for them. By managing money wisely, one’s golden years can become the best ones ever. PSECU, a credit union in Pennsylvania, has created this interesting graphic on the average retirement savings by age — check it out here!