High prices or complicated finances might have you worrying about your retirement savings running out. A lot of the advice you’ll hear is about living frugally in your golden years. But after working for decades, you might not want to give up the lifestyle you’ve worked and saved hard for.
In my experience, you don’t have to give up the enjoyable things if you get creative. While I always recommend getting a financial advisor’s input, here are 10 good ways that you can stretch your savings.
Time Social Security Carefully
Many people are ready to apply for Social Security at age 62. But if you do, you could lose up to 30% of the full check you would’ve gotten at age 67. That’s the age when most people are considered to have reached full retirement age.
If you can wait, the larger checks might keep you from running down your retirement savings too quickly. Waiting until age 70 may be even better. In that case, your check could be up to 24% larger. See your Social Security account for specific estimates based on your earnings.
Have Savings Outside of Retirement Accounts
There’s nothing wrong with using your retirement savings as an income source, but having all your money tied up there isn’t a good idea. What if an emergency comes up and you have to withdraw extra money when your investments are down? That withdrawal becomes more costly, and what’s gone can’t work for you any longer. That’s bad news for stretching your savings.
Instead, also keep several months of expenses in cash in a savings account so you’re prepared for these situations. This is like the emergency fund that everybody should have, except I recommend more than the usual three to six months’ worth of expenses. Fixed-income retirees are more at risk.
Shop Strategically for Everything
Whether it’s food you can’t live without or something for the house, shopping strategically can save you money without making you give up things you want.
This means always checking prices on different items across stores and going with cheaper substitutes (like used versions) when you can. If there are coupons or special sales, take advantage. But I don’t advise falling into the trap of buying something unnecessary on sale.
Downsize When It’s Practical
It’s typical advice for retirees to downsize their housing and cars. After all, they might need less space or be able to get by with just one car because they have no commute. If that’s your case, think about the practicality plus the savings.
If parting with your spare car means you can’t get around as easily, it could hurt your lifestyle. But if you’re living alone in a large house, moving into something smaller is worth considering.
Be Flexible About Travel Plans
I’m totally for traveling and enjoying activities in retirement. But if you’re not careful, you can run through a lot of your savings quickly in your most active years.
Retirement gives you flexibility, so take advantage of that when making travel plans. That might mean booking your trip or cruise in the off-season when prices are lower and crowds are less. When checking flights, see if you can get a better deal by changing the dates slightly. And if you have a credit card, do what I do and see if you can use points or credits to save.
I also recommend not settling for the “standard” prices when booking your hotel. The many hotel comparison sites make it easy to check prices and offer discounts. I’ve also saved on a recent trip by booking a few months in advance.
Find Free Replacements for Memberships/Subscriptions
I always recommend that retirees review the subscriptions and memberships they’re paying for and cancel the ones that aren’t providing enough value. But also consider that many you don’t want to part with could have free alternatives that bring you the same joy:
- Gym membership: Activities at local parks and senior centers, SilverSneakers program through Medicare Advantage plans, and free senior workout videos on YouTube
- Video streaming: Kanopy (through libraries), Plex, Tubi, and Pluto TV
- Ebooks/audiobooks: Libby (through libraries), LibriVox, and Hoopla (through libraries)
- Newspapers/magazines: USA Today, The New York Times, local papers, and others through public library benefits
- Music: Pandora, free version of Spotify, and CDs/digital downloads from libraries
Regularly Use Senior Discount Programs
Simply reaching a certain age (usually 50 to 60) means getting discounts of at least 10% to 15% at many businesses. I recommend either calling the places you visit or going to their website and looking for a discounts page.
Here are just a few of the places I’ve found with senior discounts:
- McDonalds
- Cinemark
- United Airlines
- Marriot
- Lenscrafters
- AT&T
- IHOP
- Albertsons
- Walgreens
- Hertz
Keep in mind that some of these companies are franchises with different rules or only offer discounts at certain times. Check the details before you shop:
Be Smart About Healthcare
Spending tons on basic healthcare in retirement isn’t unheard of. And then nursing home care can drain your retirement savings by $10,000 per month or even more.
While you might not avoid these costs, here’s what you can do to at least save:
- Preventing health problems is good for your savings, so live healthy and don’t skip the doctor visits.
- If you can’t get Medicare yet, check into Medicaid or government subsidies for affordable insurance.
- Use a health savings account to pay for medical expenses while getting tax benefits.
- Negotiate large medical bills with hospitals and doctors, who often will take less if you pay with cash or your income qualifies you for financial assistance.
- Research whether long-term care insurance makes sense to protect your savings.
- Look into Medicare Advantage plans that fill some gaps regular Medicare leaves.
- If there’s a generic, it usually doesn’t make sense to splurge for the branded medication.
- See if the company that makes your medicine has a discount program.
Make Your Withdrawals Carefully
To stretch your savings and lower taxes, you have to do some planning. This includes thinking about how much you’ll withdraw each year in retirement and from which types of accounts.
I recommend using a financial advisor since all the details get complicated. Still, here are good tips for stretching your savings as you make withdrawals:
- It’s a rule of thumb not to withdraw more than 4% of your retirement savings per year, but consider inflation and adjust based on your real situation.
- Try not to make unnecessary withdrawals when your investments are down or your tax rate is high (for tax-deferred accounts).
- Vanguard recommends a plan that involves withdrawing from your taxable brokerage accounts first, moving on to traditional accounts like your 401(k), and saving Roth accounts for last.
- Fidelity says a proportional withdrawal strategy, where you allocate your yearly withdrawal across multiple accounts, can make sense if your taxable gains are high.
- Beware that withdrawals might leave you with taxes owed on your Social Security.
- Take your RMDs once you reach the required age of 73 or 75 to avoid tax penalties.
Consider Enjoyable Part-Time Work
For many, retirement means no more work. But 20% of Americans aged 65+ still work in some form. While the income is nice, part-time work could even improve your lifestyle. Maybe you’d like to do something interesting each day, meet new friends, or keep your mind active.
What’s also nice is that there’s less pressure than in your career days. That means you have the flexibility to find work related to a hobby you enjoy or try something completely different from what your career was in. Remember, you can always pull back if you notice your lifestyle’s being impacted.
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Sources:
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- https://www.ncoa.org/article/what-discounts-can-seniors-get/
- https://mutualreverse.com/expenses-you-no-longer-need-in-retirement/
- https://www.ssa.gov/pubs/EN-05-10147.pdf
- https://www.fidelity.com/viewpoints/retirement/tax-savvy-withdrawals
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- https://spiritfinancialcu.org/spirit-financial-blog/2024/6/19/staying-ahead-of-inflation-10-tips-to-lower-your-daily-expenses
- https://www.aarp.org/money/taxes/avoid-costly-tax-mistakes/
- https://investor.vanguard.com/investor-resources-education/retirement/income-how-to-set-up-withdrawals
- https://www.mywealthtrace.com/blog/great-part-time-jobs-in-retirement
- https://www.westernsouthern.com/retirement/health-care-costs-in-retirement
- https://www.schwab.com/learn/story/plan-your-retirement-withdrawal-strategy
