Saving money is important at all stages in life. But since retirees often no longer have a steady, full-time paycheck, finding additional saving methods can help them stretch their assets further and provide a more comfortable retirement. This article will explain why saving during retirement is so critical, then dive into four ways seniors can start saving money during their golden years.
Why saving during retirement is critical
Retirees generally aren’t working anymore. Instead, they’re drawing income from a finite amount of assets across numerous accounts, investments, and government benefits. So, one of the biggest fears in retirement can be running out of money. Retirees must find ways to live comfortably in retirement — and in many cases, may want to have enough assets left over to pass down to their heirs after they pass away. Therefore, finding ways to cut costs and save more money can be vital for retirees.
4 ways to save money in retirement
While there are many ways to save in retirement, here are a few ways retirees can shore up their budgets and save money in retirement:
1. Reduce debt
Prioritize high-interest debt like credit card debt. Paying these off will save the most on interest, especially if the debt didn’t help get an income-generating asset.
After that, retirees can consider whether it’s worth it to pay down their auto or mortgage loans faster. Of course, it can be worth doing so for peace of mind, but retirees may also want to hold on to their cash for other investments.
2. Continue investing
Talk to a financial advisor who may be able to help retirees review their investments while in retirement. This can help them squeeze out more potential gains and grow their wealth further. As a result, they can enjoy a more comfortable retirement and potentially pass down more wealth.
3. Get a senior life insurance policy with cash value
Senior life insurance with cash value, such as permanent life insurance, can help retirees build wealth through the cash value growth component. This component accumulates a part of each policy premium, which grows tax-deferred at an interest rate that depends on the policy type and insurer. Retirees can withdraw from or borrow against this component when it grows large enough. They can also get their full cash value minus surrender charges if they surrender their policies.
Of course, these policies also offer lifelong life insurance coverage. This can help retirees protect their loved ones and pass down more wealth through the tax-free death benefit.
4. Sell unused items and downsize
Retirees have much more time now that they aren’t working. They can put some of this time toward decluttering their home and selling unused or unwanted items through a garage sale, consignment, or online. This can provide a quick infusion of cash for retirees.
Furthermore, some retirees may want to downsize their lifestyle now that all the kids are out of the home and they don’t need to commute. They could sell their home, buy a smaller, less valuable home, and then bank the difference.
Similarly, if a retiree has two cars, they could sell one, pay off the loan, and put any profits into savings and investments. Doing this can help with the first tip mentioned above by allowing retirees to pay off their outstanding mortgage and auto loans. As a result, they get a few lump sums of cash while cutting debt-related expenses.
The bottom line
Finding ways to save money in retirement can help retirees live more comfortably and offer more peace of mind. Retirees should consider paying down debt, specifically high-interest debt. Meanwhile, they should continue investing where possible and consider adding a senior life insurance policy with cash value to that investment plan.
Additionally, retirees may consider downsizing their homes and vehicles to save extra cash and pay off their mortgages and auto loans. Following these tips can help retirees maximize their retirement assets and enjoy their golden years.