Five Smart Ways to Stretch Your Retirement Dollars

FAI Wealth Management Shares Five Smart Ways to Stretch Your Retirement Dollars

For many Americans, the odds of enjoying a longer life are greater than ever before.

And not only are we living to advanced ages, we’re also staying active and healthy well into retirement. That’s great news but it presents a challenge: how are we going to pay for all those years of healthy, vibrant living? Here are five smart moves to make the most of your retirement income:

1.     Take advantage of catch-up contributions. While most Americans rely on defined-contribution retirement plans such as a 401(k) to save for retirement, most of us aren’t putting enough into them. The key to building a long-lasting nest egg has always been to save as much as you can.  If you’re age 50 or older, the IRS allows catch-up contributions to your 401(k) account ($6,000 in 2018) as well as other retirement vehicles. Depending on your age and your account balance, those catch-up contributions could add a much needed boost to your retirement account, especially if returns are good while you accumulate the money. The numbers look even better if your employer provides matching contributions.

2.     Delay collecting Social Security. The longer you wait to start drawing Social Security, the more you’ll get in the long run. Waiting to claim until you reach full retirement agewhich is 66 or 67, depending on the year you were borngives you 100% of your benefit. If you claim Social Security before you reach your full retirement age, though, your benefits will be significantly reduced. If you take your benefits when you first become eligible at age 62, for example, you'll receive just 75% of your full-retirement-age benefit every month for as long as you live. In contrast, if you can wait past full retirement age to take benefits, you can count on additional money each month. According to the Social Security Administration, if you were born in 1943 or later and delay collecting Social Security benefits beyond your retirement age, you’ll see an 8% annual increase each year until age 70.

3.     Make the move to a tax-friendly state. Some states will tax virtually any type and amount of retirement income. But seven states have no state income tax at all, and two states tax only dividends and interest. Many other states have retirement-income exemptions. The most generous exclude all retirement income from state tax, while others exempt a certain amount. Check out this Retiree Tax Map to see how each state taxes retirement income. If you’re open to moving, it could be a big boost to your piggy bank.

4.     Take advantage of senior discounts. There’s a wide range of discounts available to seniors, including reduced travel rates, deals on dining and entertainment, and lower insurance premiums, to name a few. While not every business offers a senior discount, most seniors overpay for certain services simply because they didn’t know a reduction exists. If you’re unsure if the service provider offers a senior discount, it can pay off to inquire about it. Be sure to check out some of the many websites that post senior deals, such as Senior Discounts and The Senior List.  

5.     Consider an encore career. The longer you stay in the workforce, the fewer retirement years you'll have to fund. But continuing to work doesn't mean you have to stay in the same job. Many would-be retirees instead turn to encore careers, putting their skills to work in a field they may not have considered previously or choosing to pursue a longtime passion. Switching to part-time work is another option. It allows you to have more time for yourself, but you'll still earn some income to cover expenses and help you avoid dipping into your nest egg.  And an encore career gives you the added bonus of feeling more connected and in tune with life, especially if you’re fulfilling a passion.

If you have questions, FAI can help you review your options and create a plan.  Contact Mark Stinson or Lyn Dippel to discuss your needs.

About FAI Wealth Management, Inc.:  Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $330 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at http://www.faiwealth.com or call 410.715.9200.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by FAI Wealth Management-“FAI”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from FAI.  Please remember that if you are a FAI client, it remains your responsibility to advise FAI, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. FAI is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the FAI’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: FAI does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to FAI’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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