I’m passing along the following list from Fool.com. It’s a great reminder for retirees that saving and planning for retirement should and does not end once you leave the fulltime workforce. There are a number of actions that can be taken to continue to secure your retirement beyond those done in your working years. When possible, all should be implemented, especially as we continue to live longer and the need to stretch our nest eggs gets more imperative.
What can you do to extend the life of your nest egg during retirement? Here are a few ideas.
Potentially the smartest move seniors can make these days is to continue investing well into their retirement. It’s easy to make your nest egg last long if it keeps growing, and the one tool that’s shown time and again that it can outpace the rate of inflation over the long run is the stock market.
Of course, the usual rule applies: If you need your money in less than three years, the stock market may not be the best place to invest. However, your chances of living well into your 80s or 90s are growing by the year, which means you could have multiple decades to put your money to work once you retire.
Open or continue adding to a Roth IRA
If they still have sources of income earned from some form of work, seniors should consider opening, or continuing to add to, a Roth IRA. A Roth IRA is a tax-advantaged retirement account that allows qualified withdrawals to be made completely free of taxation. The general rule is that money added to a Roth needs to remain invested for five years before it becomes eligible for withdrawal.
What’s really something to like about a Roth for seniors is that unlike a Traditional IRA, it allows seniors to make contributions regardless of their age (Traditional IRAs cap age 70 1/2), and Roths also have no minimum required distribution.
Monetize one of your many hobbies
Another way retirees can improve their financial situation in their golden years is to monetize their hobbies. Do you enjoy hitting up garage sales on the weekend? If so, put on your sleuth hat and uncover hidden gems at yard sales that can be flipped for a tidy profit on online marketplaces such as eBay. Signs.com suggests that items picked up at yard sales and later sold on eBay typically generate a 462% profit.
It’s also easier than ever to sell crocheted items and other craft goods with online sites such as Etsy, or to take your coupon habit to new heights in order to save on those trips to the grocery store.
Take advantage of senior discounts
One of the advantages of growing older and wiser is that you have access to a number of discounts you may not be aware of. Senior discounts can help extend the life of your existing money by allowing you to spend less.
Certain restaurants offer discounts to senior citizens, such as Taco Bell offering seniors a free beverage; prescription drugs are sometimes discounted for seniors on Medicare; public transportation costs may be lower, such as in San Francisco, where low- to moderate-income seniors can ride the MUNI for free; and seniors aged 60 and older may qualify for tax counseling and assistance from IRS-certified volunteers.
Stick to a budget
An intelligent way to extend the life of your nest egg is to make sure you’re living within your means on a day-to-day basis. Your income during retirement is typically going to be lower than the income generated during your years in the workforce, thus it’s in your best interest to make the transition to a lower income as smooth as possible.
Regardless of your age, but of particular importance to retirees because of their shift in annual income, a budget can be extremely important. Formulating and updating a budget can take 30 minutes or less each month, and it can help you gain a critical understanding of your cash flow that can translate into optimal saving and investment potential.
Have a defined withdrawal plan
To echo a similar tone to the discussion about budgeting, seniors need to have a well-defined withdrawal plan for their money. If seniors don’t have a good understanding of their cash flow, they could burn through their nest egg quicker than expected.
Furthermore, if seniors aren’t aware of the tax implications of their withdrawals, they could be in for an unpleasant surprise. Retirees should be aware of what tax implications they could face given the amount of money they expect to withdraw from retirement accounts each year, and be prepared to pay that amount when filing their taxes. The last thing you want during retirement is a tax surprise.
Pick a tax-friendly state to retire in
Retirees also need to understand that whichever state they call home matters. For example, there are 13 states that tax Social Security benefits, although thankfully nine of them offer some level of income exemption. Still, that leaves four states — West Virginia, Minnesota, Vermont, and North Dakota — that tax your Social Security benefits without exemption.
It’s also worthwhile to take into account what you may wind up paying in property taxes and state/local taxes. Moving to a state that’s considered tax-friendly could certainly make your dollar go a little further. For instance, the Tax Foundation notes that New Jersey residents pay the highest average property tax rates in the country, at 2.38%, whereas its neighbor, Delaware, is among the tax-friendliest states, with an average property tax of just 0.55%.
Seek out dividends
Another way retirees can boost their income in retirement and extend the life of their nest egg is by purchasing dividend-paying stocks, or even highly rated local municipal bonds, many of which may be tax-free.
Dividend stocks are not only useful for hedging against a drop in the stock market, but they often signal a company is financially healthy and capable of growing over the long term. Plus, buying a dividend stock gives you the opportunity to take advantage of possible share price appreciation throughout your golden years.
Get a part-time job
Retiring doesn’t mean you have to step away from the workforce completely. More and more retirees are finding out that they either don’t have the funds needed to last throughout their retirement, or they simply don’t know what to do with all of their free time. The solution? Grab a part-time job in a field that interests you.
It’s worth noting here that it’s a lot tougher for seniors to get a job simply because most employers will look to younger employees to drive their businesses. Furthermore, it’s no guarantee that your health, or the health of close family members, will cooperate and allow you to get a job after your initial retirement — so don’t count on it. However, if you can work, those extra couple of years could wind up making a substantial difference.
Hold off on filing for Social Security benefits
You’ve probably heard this a fair number of times before, but if you do wind up working well into your 60s, or you choose to head back into the workforce following your initial retirement, relying on your work income to cover your basic expenses can be a smart move that allows you to hold off on filing for Social Security benefits.
As it stands now, eligible retirees can claim Social Security benefits between ages 62 and 70. Each year that you hold off on filing for benefits, your net benefit grows by 8%. Wait until the last moment possible, at age 70, and you’ll be paid the maximum monthly Social Security benefit (based on your income history over your 35 highest income years) that you’re entitled to. Even if Social Security cuts are coming over the next two decades, this could help lengthen the life of your nest egg.
Regularly visit your doctor
Another good idea is making sure you visit your primary care physician on a regular basis.
Why? Other than the fact that you’ll probably feel better, your PCP can catch potentially chronic or terminal conditions early before they become complicated and costly ailments. This certainly isn’t a (small-f) foolproof method of avoiding the high costs of medical care later in life, but staying on top of your medical care could mean the difference between exorbitant late-in-life expenses or modest medical expenses.
Avoid gift-giving pitfalls
One of the easiest ways you can avoid burning through your nest egg at too quick of a rate is by ensuring you don’t wind up gifting money away that you can’t afford to lose. It might be easy to turn down giving $20 to someone you don’t know, but when your grandchild needs $10,000 for their first year of college, or your child needs $25,000 to put a down payment on a home, it’s a lot tougher to say no.
What you should keep in mind, here, is that children and grandchildren have time on their side, and retirees generally don’t have that luxury (even if age expectancies are on the rise). This means grandchildren and children can take loans out against their education or assets, but a senior can’t take out a loan against their retirement.
Get a second opinion
Last but not least, consider getting a second, third, or fourth pair of eyes on your retirement plans, including your investments, how they’re allocated, and how you plan to withdraw your money in retirement. It’s rare that everyone has all the answers, so bouncing ideas off of a few knowledgeable people, including investment advisors, can be a smart move.
Lastly, remember this: In the end, it’s you, and only you, who’s in charge of your retirement.