Saving After Retirement

Saving after retirement has become a must-do for an increasing number of Americans. This is an emerging trend. What is driving it is that Baby Boomers are waking up to the reality that is possible to run out of money during those supposed Golden Years.

In essence, there are three reasons why the retired and those near retirement are fearful that they could become destitute.

One is the longer lifespan. According to the World Health Organization (WHO), the average lifespan in the U.S. is 79.8, with 82.2 the average for females and 77.4 for males. When doing the financial planning for retirement, too many did not factor in providing income for so many years.

A second reason for terror among some Baby Boomers is that they wound up with lower-than-projected returns on their investments. The Great Recession took a bite out of their portfolios. In addition, the value of what is probably their biggest asset – the family house – might have depreciated. They do not anticipate it will regain its previous value any time soon.

A third reason for gloom is the ever-rising cost of living. Even in the current low-inflation environment, the price of necessities like food continues to increase. So may property taxes. Healthcare costs not completely covered by Medicare are of concern. They too are going up, not down.

Given these realities, it is obvious that saving for retirement is not enough. During retirement, it is also imperative to save, especially for the unexpected. How can that be accomplished?

To begin with, more money coming in provides more funds to save. The Retirement Confidence Survey from the Employee Benefit Research Institute found that 70 percent of employees anticipate they will have to continue to work for pay when retired. A number of them are already doing that. Although there is a scarcity of traditional full-time jobs, the growth is in contract assignments. Some of those are through the sharing economy (Uber X, TaskRabbit) and freelance placement services such as eLance. In addition, the entrepreneurial types are starting online businesses, buying franchises, and turning hobbies into money-makers.

Additional Income also comes from interest on savings accounts, money market funds, and certificates of deposit. In all three the principal and yields are protected by the FDIC. It also pays off to move funds not needed for monthly bills from the checking account, which does not pay interest, to those accounts that do. The yield on equities can be higher than many kinds of investments, but the risk is also higher. A less lucrative but safer path could be investing in mutual funds.

Another tactic to free up money to save is reducing fixed expenses. Some Baby Boomers move to a smaller house or decide to sell the house and rent. Others relocate to a lower cost of living geographical area. Also, the retired are sharing their lodgings and therefore expenses with roommates who are not relatives. Less dramatic ways to cut back on everyday costs is to create a budget and stick to it. Staying within it frequently requires researching senior discounts, shopping in big box and consignment stores, and purchasing generics instead of brands.

In addition to building up a reserve fund, saving in retirement and saving after retirement can also create peace of mind. Personal emergencies, economic recession, and inflation are no longer so feared.

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