Aging is inevitable for all of us, and there’s no reason to be afraid of what could be some of the happiest and most gratifying years of your life. The investments you make today are the key to getting financially fit so it’s crucial to make the right decision when it comes to using your money.
Regardless of your age, it’s never too late to find and put into practice some of the best ways to manage your finances in retirement.
Your financial adventure doesn’t end when you retire. Even if you’re done with retirement planning, you still need to learn how to spend and save money after retirement. This isn’t always easy, especially for those who live on a fixed income. So, the fact that there’s no standard playbook indicating genius ways to spend your money can be irritating.
However, the absence of one-size-fits-all instructions is actually a plus. It allows you to choose from a wide range of saving and spending strategies, letting you shape your golden years as you want them to be.
We’ve selected some genius ways to spend your money after retirement so you can know exactly how and where to invest your finances!
1. Start a Business
Once you retire, you realize that there’s so much free time in your schedule that you can dedicate to your passion and hobbies. Rather than retiring, a lot of seniors are actually using their free time, professional connections, and experience to start their own businesses.
If you do have adequate financial resources, think about following a dream you’ve always wanted to turn into reality. So, setting up in business is a pretty good way to spend your money after retirement.
Or maybe you want to offer something back to society. Using your knowledge and experience in order to help others learn new things can definitely help some retirees find a new purpose.
If you already have a business idea, create a business plan and meet with your local state licensing board or chamber of commerce to calculate the cost of starting your new project. Whether you pursue your dreams for self-fulfillment or to obtain profit, it could be a rewarding way to use your money after retirement.
2. Continue to Regularly Invest
You should not stop investing just because you are retired. For one thing, retirement may last much longer than you expect. According to the latest data from the Centers for Disease Control and Prevention, life expectancy is around 77 years old.
If you retire at the age of 62, the estimated life expectancy gives you more than 15 years of spending your money without regular work. That’s a long time to invest, and it may be even longer.
When it comes to investment decisions, having the right strategy and a good portfolio can help ensure your retirement savings will last.
We have 6 more genius ways to spend your money after retirement!
3. Delay Social Security
It’s not exactly a place where you “put” your finances, but delaying Social Security benefits is a good example of what you may “do” with your money after retirement. If you were born in 1943 or later, each year you delay collecting Social Security increases your eventual monthly payouts by up to 8% until you reach the age of 70.
This delayed retirement credit of 8% per year is guaranteed and you must reach full retirement age to obtain it. Basically, you get a guaranteed return for each year you delay your Social Security, and this return is pretty tough to beat.
4. Contribute to a Roth IRA
Contributing to a Roth IRA is definitely a genius way to spend your money after retirement. It may seem counterintuitive, but there are lots of potential advantages to making IRA contributions in your golden years. The average retirement usually lasts 20 years. If you continue to contribute to an IRA at age 67, you’ll be able to create a strong portfolio for your 80s.
The only drawback of a Roth IRA is that your contributions aren’t tax-deductible. But that shouldn’t stop you. As a retiree, you’re likely to be in a low tax rate compared to when you were working. So, receiving a tax deduction on your contribution may not be important. On top of that, unlike traditional IRAs, a Roth IRA doesn’t have an age limit.
5. Pay Off Your Mortgage
If you’re looking for things to do with your money after retirement, think about paying off your mortgage. When you retire, the remaining debt on your mortgage may be small enough to pay off in one lump sum.
After doing this, you can spend the rest of your life without worrying about a rent payment or mortgage. This can free up finances for other activities or provide you with the assurance that you’ll have your own place to stay for free.
It definitely makes sense for you to spend your money this way after retirement, especially if your funds are kept in a low-interest savings account. But keep in mind that this works best for individuals who have an adequately funded retirement account and yet own a substantial amount of money set aside for unexpected emergencies.
6. Buy Income-Producing Investments
Once you retire, you stop receiving a monthly income from a job. But there are several ways to replace this amount of money after retirement.
Some options would be to start investing at least a small portion of your money into mutual funds, income-producing stocks, bonds or exchange-traded funds. Each type of investment has its own particular reward/risk profile, and you should probably speak with a financial advisor to find the best instruments for you.
However, a mix of all these types of investments mentioned earlier might help you to replace your employment income in your golden years.
Tip: You should always keep a portion of your retirement savings in safe backup plans. The main goal of any safe investment is to preserve what you have rather than generate a high current income.
7. Keep Money in Your 401(k) for as Long as Possible
If your old employer allows it, you should consider keeping your money after retirement in your 401(k) plan as long as possible. This may be a wonderful strategy for retirees. To begin with, your money will continue to stay in its tax-free wrapper. But that’s not all. You will also still be able to access all of your old employer’s 401(k) options.
Assuming you had a solid plan in place, this can be far less stressful and complicated than having to move your retirement savings dollars from a 401(k) plan into an IRA and restart your entire investment program from scratch.
8. Prepay Funeral Expenses
This isn’t exactly a genius way to spend your money after retirement, but it surely has some advantages. First of all, you have to know that the average expenses of a traditional funeral go up to $7,640, according to the National Funeral Directors Association data.
Although no one wants to talk about their own mortality, it’s important to have a prepaid funeral plan as it will solve several potential problems.
By prepaying funeral expenses, you make sure that you’ll get exactly what you want — whether it’s a burial or cremation. Another advantage is that you’ll relieve some of the burdens on your family during what is expected to be a tough time.
Since we haven’t mentioned traveling as a great way to spend your money after retirement, here’s an article that may inspire you: 7 Amazing Places You Should Travel to When You Retire.