Maximizing your retirement savings

Experts tell us that our retirement goal should be to save an amount that totals 80% of our annual income for 30 years. For some of us, that’s over $1 million!

Many issues get in the way of our ability to save that much. Sometimes we’re paying back student loans well into middle age, or we have unforeseen emergencies, or our employment isn’t consistent.

We’ll receive a little income from Social Security, but most experts agree that it probably won’t be enough — especially if your vision of retirement includes travel and leisure. The average Social Security amount in 2017 was only $1,460 per month.

Without a healthy savings in place, your retirement may look a lot different than you expected.

Fortunately, if you haven’t been saving enough in a retirement account, there are other options available to help you increase your post-employment funds.

Work part-time

Working after retirement is a reality for many people. According to the Bureau of Labor Statistics (BLS), in 2014, 40% of people ages 55 and older were working or looking for a job.

Whether it’s to earn a supplemental income or for fun, seniors are remaining in the workforce much longer — a trend that the U.S. Department of Labor projects will increase.

You may not want to work full-time after retirement, but there are plenty of part-time options.

The Bureau of Labor Statistics lists the following occupations as the most heavily populated by seniors:

Curators, archivists and museum technicians
Bus drivers
Furniture finishers
Proofreaders
Medical transcriptionists
Real estate brokers and agents
Tax preparers
Travel agents

Some other options for part-time employment include:

Coaching and refereeing
Classroom assistant
Tour guide
Usher/ticket taker
Library assistant

Additionally, the booming “gig economy” provides many opportunities to work as a freelancer or consultant. If you have a specialized skill in demand, this may be a great way to earn an income and keep a flexible work schedule.

Pro-tip: If you start working again after social security benefits kick in, you could risk a reduction in benefits if you earn over a designated income amount (in 2022 it was $19,560). Check with the Social Security Administration for the most current information on work limitations post-retirement.

Dip into your Health Savings Account

A health savings account (or HSA) is a special savings account used to help people pay for health expenses when they have a high deductible insurance plan. People make pretax contributions to their HSA accounts each paycheck and then pull funds from the account when they need to pay for medical expenses. If the funds are used to cover approved medical expenses, they’re not taxed.

HSAs are helpful in covering medical costs, but what many people don’t realize (or take advantage of) is that HSAs can also be an investment tool that you can use to pay for expenses in retirement.

Here’s why:

HSAs are tax-friendly: Contributions made from payroll deductions are tax deductible and those made directly can reduce your federal and state taxes. Further, HSA accounts grow tax free, and withdrawals made for medical expenses are not taxed. When used correctly, HSAs offer more tax advantages than a 401K plan!
HSAs have healthy contribution limits: Individual and family contributions may vary each tax year. At age 55, you can contribute an additional $1,000 a year. You can make contributions to your HSA up until you turn 65.
HSAs offer flexibility: HSA balances are carried over every year. If you switch employers, the account will move with you. If you don’t want to use your HSA funds for medical expenses and you are 65 or older, the withdrawals will be taxed as income.

Relocate

Ever wonder why Florida is considered the retirement capital of the United States? Sure, the abundant sunshine and arthritis-friendly weather are appealing to seniors, but that’s not the only draw. Florida has long been considered a great place to retire because of the moderate cost of living and low taxes. Florida’s great, but it doesn’t make the cut for most affordable places to retire. If you think you’ll be on a tight income when you stop working, consider AARP’s list of 10 cheapest places to retire as of 2017:

Birmingham, AL
Detroit, MI
Jackson, MS
Memphis, TN
Toledo, OH
Brownsville, TX
Augusta, GA
Cleveland, OH
Akron, OH
Montgomery, AL

If you crave an even bigger post-retirement change, you may want to consider joining the 500,000 retirees who live outside the United States. Many countries are far more affordable, have a strong community of retirees, and provide quality healthcare for seniors. Retired people who move out of the United States usually still receive social security benefits, but they are no longer eligible for Medicare.

According to International Living, Costa Rica is the most retirement-friendly foreign locale because of its low cost of living, affordable healthcare and, of course, breathtaking beaches. Here is the full top 10 list as of 2018:

Costa Rica
Mexico
Panama
Ecuador
Malaysia
Colombia
Portugal
Nicaragua
Spain
Peru

Downsize

Another great way to free up some extra funds during your retirement years is to downsize. Downsizing may reduce your cost-of-living expenses, provide you with spending cash, and can minimize any clutter that has accumulated over time. Here are some ways to live more modestly and with more freedom from “stuff.”

Sell what you don’t use: If something has been sitting in your closet or attic for years and it doesn’t hold sentimental value, consider selling it. You can hold a garage sale or sell the items on Craigslist or eBay®.

Get a smaller place: If you’re still paying a mortgage on a larger home, think about moving into a smaller place in a less expensive neighborhood — but only if it reduces your mortgage bill.

Sell your wheels: If you own more than one vehicle, consider whether you really need that extra set of wheels. Selling your vehicle may reduce your debt and insurance payments and will free up some cash.

Create a better budget: Take a good look at the income you’ll be bringing in from your retirement funds and social security and see how well it covers your current expenses. Then, go through your expenses and find places where you can cut costs. Can you spend less on clothing or personal items? Are you eating out when you could be making food at home? Even small adjustments in your living expenses can make a big difference over time.

The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.

Article written by EVERFI

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