How to Save During Retirement

How are you fixed for saving as far as retirement goes? More specifically, are you saving enough to ensure that you are able to retire comfortably?

Saving for retirement is a concern shared by the masses, anyone who has yet to call it quits work wise.

The reason retirement is so worrisome for most is the disparity of what is believed to be a safe financial figure you’ll need to retire compared to what those who are saving for it actually have set aside.

The average American feels as though they’ll need a million dollars to retire and not be worried about their money situation once the steady paycheck of their job falls by the wayside, but in actuality about 50 percent of those only have about $25,000 saved.^[1]

One aspect of retirement that often goes overlooked, however, are for those who have managed to save properly and are ready to retire and feel as though, once they’ve combed through the numbers, they can retire and not give that decision even a second thought.

The biggest mistake that you can make upon retiring is believing that they money you’ve wisely set aside can last forever, and that you can abandon any and all of the past practices that allowed you to retire and not have much concern doing so.

With so much talk centering on how to retire properly, how to save for retirement and get the most out of your Golden Years, what about saving money and spending wisely, and everything else financial that goes with it, while you’re retired.

The common issue that most retirees face is running out of money, and that is a concern of 50 percent of those who are retired, with only about 11 percent actually going back to work to take on a part-time job since money is starting to run thinner than when they retired initially.^[2]

So how does one plan for retirement and then find themselves heading back to the workforce after only a few years into the actual retirement? Most of what ails retirees is that initial surge of wanting to spend, through travel, vacationing and just doing all the things you didn’t or weren’t able to find the time to do because you were consumed by work, more of then than not.

Retirement is not a full blown, all out assault on your assets and all that you have saved. Instead, part of the financial planning has to include trips, for example, and being able to have the money necessary to do that before committing to retiring altogether.

The other piece is being able to save even while you’re retired, a concept lost on most who have hung up their power suits or work attire in favor of cabana wear and dipping into those saving to buy a Cadillac outright.

In order for retirement to be worry free and ultimately last, you’ll have to follow guidelines that guide you through your post-work years.

Here’s how:

Budgeting Doesn’t Stop even After Working Does

If you’re one of the few who retired and did so with a game plan in mind, chances are you spent most of your working years budgeting out income versus expenses, and always had a keen sense of what you were buying, if it was work it or perhaps marking it off as a “wait and see” item.

Part of what budgeting works so well is the attempt to pay off or stay out of debt, but that isn’t always the case even after you retire. About 13 percent of those retired say they’re worried about living in debt forever.^[3]

Another 58 percent fret about finances after retirement, with the assumption they don’t have enough to continue the lifestyle they had when they were working.^[4]

That last comment is the most important one as far as retiring and living comfortably are concerned. Retirement is what you want it to be, and that can mean anything from spending thousands of dollars each year traveling to dialing down expenses so that you can make your money last as long as possible.

No matter which end of the financial spectrum you’re on, you have to budget based on the money you’ve saved for retirement and assuming that you’re still on that same monthly plan (expenses vs. income), no matter if that’s a trip to Italy or the grocery store.

Financial planners, the ones you should be using as you prepare for retirement, almost always ask the question what do you want your retirement to look like. Then, much like a master craftsman or contractor would do if you detailed the ideal kitchen space for your home, builds the budget and then directs you on how to save.

If someone wants retirement to be modest, then decides to buy a $50,000 RV and travel across the country, you’ll put a dent in your “nest egg.”

Budgeting doesn’t stop even if you aren’t getting bi-weekly paychecks anymore from your employer. Budgeting arguably has to get smarter, with more emphasis on saving through spending only what is allowable based on that aforementioned plan you already put together.

From Withdraws to Stocks, Make your Money Work for You

Retirees often determine how much money they’d like to take out of their retirement savings account upon retiring, and then estimate what they’ll have left once that takes place.

Where trouble starts to occur is when you start taking chunks of cash out of retirement account at a feverish, record pace.

Choosing a rate of withdrawal is important so that you can keep it consistent, but understanding that it can be adjustable based on life-changing events. That said, withdrawing money for what you’d consider “wants” versus “needs” is where you start to run off course.

Here’s an example of an initial withdrawal versus how you can monitor and maintain over the next 30 years.

A 65 year old with half a million dollars saved takes out $20,000 (4 percent) from retirement funds, you can expect the rest of your money to last 30 years, roughly an 80 percent chance.^[5]

A lot of what determines that initial withdrawal amount or gauging how much you’ll need each year depends on a lot of factors. You can make an assumption of how long you want your retirement to last, but that’s often times met with uncertainty, obviously, since a 65 year old might live 15 or 30 more years.

Don’t overlook the importance of how you can increase the return on the money you have saved through your stock portfolio. While most seniors and retirees worry about losing money in a stock market crash of sorts and the instability of the market, you still can’t overlook the value on being involved in this avenue, either.

An old rule of thumb is using the 110 formula, which is that number minus your age, which leaves you the percent of stocks you should own. The example of 110 minus a 70 year old means 40 percent in stocks.^[6]

And speaking of being 70 years old, you can also consider holding off on taking advantage of your social security, too. Every year after 62, your retirement payout from social security increases 8 percent until you hit 70 (after 70, the increases stop).^[7]

All the more reason to wait and live off your retirement savings exclusively.

Change your Lifestyle and Live Comfortably

Downsizing often plays a key role retiring, with 48 percent of people feeling as though that option is how they’ll be able to “afford” retirement in a comfortably way.^[8]

One reason that downsizing is so lucrative from a retirement perspective is the amount of money most 65 year olds live on from one year to the next. Approximately 25 million Americans age 60 and older live at or below the poverty line ($29,425) for one person.^[9]

Certain areas in the United States are less expensive versus potentially where you’re living at the moment.

Birmingham, Alabama, is the most affordable city to retire to, with the cost of living being just a little over $30,000 ($33,219) per year for an individual, with Detroit, Michigan and Jackson, Mississippi coming in second and third.^[10] Other cities that made the list are Augusta, Georgia and Memphis, Tennessee.

While some might be content on staying put in the home they own and have lived in their entire life, you can’t ignore the notion that you can increase your income and comfortability in retirement by changing the scenery.

That change in scenery also could mean the thoughts of working a part-time job after you retire. The truth is most people, as detailed, don’t feel strongly about how much they have saved, but aren’t interested in the hustle and bustle of a 40 plus hour work week when they reach a certain age.

Part-time work for retirees is common, much more than it was 30 years ago.

But it does come with some restrictions that you’ll have to mull over, as well.

Keep in mind that the most you can earn $16,920 at most (as of 2017) while retired. If you make more than that, your social security will be deducted if you’re under 62 (the full retirement age). Social security takes $1 for every $2 earned.^[11]

Working while retired also needs to be focused on a job that makes sense financially for you too. Let’s say you get a part time job, and the commute, parking and tolls actually takes away from what you make, so you need to ask yourself is it really worth it? Maybe you’re going to end up working for free, and that’s not the purpose of the extra income.

If you’re spending $10 to park, another $10 on lunch and $5 in tolls, that’s $25 off the top of whatever you make during the course of a day. A job that pays $10 per hour for four hour work day (remember, most retirement jobs are part time), you’re spending more than half of what you made on just getting to work and eating.

Being able to enjoy retirement is something that is rarified air in 2018 and beyond. With concerns abounding about medical care, health, wellness and of course money, you can’t help but feel a little overwhelmed even if you’ve saved plenty to retire.

You always have that uneasiness that if something transpires, will you really be able to pay for it? Trepidations for retirees stretch from managing debt even after you’re done working, to college for your kids (if you’re still paying for that) or being able to survive on what you saved while you were on the job.

The work really doesn’t stop, however, even if you’re no longer tracking hours, punching in and out or taking sales calls or business trips.

The post-retirement work begins with budgeting, being smart with your money and not hitting the ground running at 65 (or whenever you retire) and suddenly finding yourself woefully short on cash after only a few of those Golden Years.

This doesn’t mean your retirement plans can’t include a vacation home, moving south for good, spending money on the sights and sounds of vacations abroad or taking in all that you’ve wanted to for so very long.

All of those aspects of retirement only work if they were originally part of your savings plan, otherwise you’re setting yourself up for a short, unfulfilling retirement that is destined to end abruptly.

Those who retire and do so with the same poise and financial acumen they had when they were actually saving to retire are the ones that can breath a sigh of relief knowing that realistically they’re not anywhere close to returning to work.

Any shortage of funds shortage is brought on ironically by a drastic change of how they saved or spent in preparation to retire.