The Best Money Gifts You Can Give Yourself as a Retiree This Year
Written by
Karen Doyle
Edited by
Levi Leidy
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The holiday season is fast approaching, and if you’re retired, you may be thinking about getting a jump start on your shopping. But have you thought of giving yourself a gift this year, in addition to — or even instead of — buying for everyone else?
Here are the best money gifts you can give yourself as a retiree this year.
The Gift of Compound Interest
There’s a lot of information out there about how to save for retirement. Open an individual retirement account (IRA), contribute to a 401(k) and so on. What is not so readily available is information on how to spend in retirement. There are some ways to spend your retirement assets that are smarter than others. Here are some tips.
You Can Wait To Take Social Security
You don’t have to begin taking Social Security when you retire. If you are in good health and there is longevity in your family, you may want to postpone taking Social Security benefits until age 70. Your benefit will grow 8% per year from your full retirement age until age 70. It’s pretty hard to get a guaranteed 8% return on any other investment. Of course, this means you’ll need to have other assets to live off of until you start collecting your benefit, if you’ve stopped working.
Required Minimum Distribution Doesn’t Equal Required Spending
At age 73, you are typically required to start taking distributions from your qualified retirement assets. The IRS is happy to let you set aside pre-tax money for your retirement, and to let it grow tax-deferred, but eventually they want their taxes. So, beginning at age 73, you need to take a required minimum distribution (RMD) based on your age and account value, which is taxed as ordinary income.
But just because you withdraw this money from your IRA or other retirement account doesn’t mean you have to spend it. You can withdraw the money, pay the taxes and then deposit it into your non-retirement savings or investment account, where it can continue to work for you.
The Gift of Experiences
Once you reach retirement age, you may find you don’t need any more “stuff.” That’s when it’s time to stop buying things for yourself — or for others — and start enjoying experiences instead. Take a class — your library or senior center may offer free or low-priced instruction in any number of activities. Visit a nearby landmark or historical site that you’ve never seen before, even though it’s in your own town.
Giving experiences instead of gifts to friends and family is a great way to spend more time with those you love. Rather than buying a new video game for the grandkids, give them the gift of baking cookies with grandma. Or have them come over for a sleepover — this has the added bonus of giving mom and dad a night off too!
The Gift of Boundaries
It’s human nature to want to help our children, even when they are adults. But once you are retired and they are grown up, it’s time to set some boundaries around how much financial help you’ll provide. This goes for other family members and even friends, if that applies.
It’s difficult to watch your loved ones struggle, and it may make you happy to be able to help. But helping others to the detriment of your own financial security is a slippery slope, and one that you want to avoid.
Setting boundaries will help you, but it also has a sneaky way of helping those who would cross those boundaries. Adult children who become too dependent on you will not develop the skills they need to support themselves. And if they rely on you too much, what happens when you — and your money — are gone?
Do them a favor and limit how much financial assistance you give your adult children. If you have to, you can gradually taper off your support, but the end result should be financial independence for them and enough for a comfortable retirement for you.
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