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7 Ways to Maximize Your Retirement Savings When You Leave the Workforce

Author: Ethan Taylor

Retirement isn't the end of the line anymore and can easily last for twenty years or more. If you are like millions of people, you probably didn't save enough for this phase of your life. But that doesn't mean you're in a hopeless situation. There are a host of ways to maximize your savings even if you are facing a significant shortfall.

Curb Your Expenses

Income doesn't flow as freely in retirement, so being mindful of your expenses becomes essential if you want to maximize the amount you save. Depending on how much you want to put away for the years to come you could downsize your home or your lifestyle or curb the little expenses that quickly add up. Either way the idea is to free up more money to save for future costs.

Delay Taking Social Security Until 70

A surefire way to boost your savings is to get more each month from Social Security, yet far too many people take it as soon as possible. Waiting has a lot of benefits, mainly for your bottom line. 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. The longer you wait, the more you can earn and thus save.

Cut Income Taxes

No one thinks of saving money when it comes to income taxes but in retirement you can even find some savings there. When you retire your income declines which automatically means lower taxes. Not to mention there are deductions that weren't available to you when you were working that can save you more money. To lower their tax income further, retirees should curb their expenses, so they draw down less from their retirement accounts.

Get A Part-time Job

The ideal way to increase savings is by working. Retirees can get a part-time job and save all of their earnings. Having a part-time job boost savings, but it also gives retirees a purpose. Retirees that started collecting social security benefits need to be careful they don't run afoul of IRS rules. If they earn more than $14,160, the benefit is reduced by $1 for every $2 above that limit. People who are in full retirement won't see their earnings impacted at all.

Consider Using A Rewards Card

When it comes to credit cards, you want one that rewards you for the purchases you are going to make—that is where rewards credit cards come in. For retirees who like to travel getting a travel reward card can reduce the amount of money they spend on airfare and hotels, freeing more up for savings. If you spend on specific things each month then a cash back, the credit card that gives you a percentage back on everyday purchases may be right for you. Keep in mind that the only way a rewards credit card will boost your savings is if you pay it off each month and don't spend unnecessarily just to get the extra rewards points.

Be More Aggressive With Your Investments

While this strategy is not for everyone, investors can increase their return and thus their savings by being more aggressive in their investments. The knee-jerk reaction when someone enters into retirement is to become conservative, moving most of their money into bonds and stable large-cap stocks. Doing that was the norm in the past but because retirement often lasts longer than in the past you have to be less conservative in the early years of retirement. That doesn't mean throwing all your money into high-flying stocks or risky investments, but it does mean increasing your risk tolerance somewhat while staying diversified.

Be Mindful of Bank Fees

Any easy way to curb your expenses and boost your savings is to be mindful of the fees you pay for banking with a particular financial institution. That's because banks can charge a range of fees such as a fee to maintain a checking account or a fee for using an ATM outside the bank's network or for overdraft protection. These fees may be nominal, but they can quickly add up. Take ATM fees for one example. Go to a non-bank cash machine and you can get hit with a $3.00 just for withdrawing money. These days there are a lot of banks and financial institutions that have low costs or are willing to wave fees. If your bank doesn't help out, it may be time to find another one so more money can go to your savings.

The Bottom Line

In a perfect world, everyone would enter retirement with enough money saved to live out their golden years but the harsh reality is many people don't have much saved at all. If you fall into the latter category, it doesn't mean you will end up desolate. From getting a part-time job to getting a little more aggressive with your investments, there are a ton of ways to maximize your savings when you are already in retirement. (Read more, here: The Financial Implications of Working in Retirement.)

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