8 Financial Moves Retirees Are Making With Their Money Today
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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Retirement isn’t always a financial breather. Many retirees are balancing debt, everyday costs, healthcare needs and legacy goals at the same time. A recent report from the Transamerica Center for Retirement Studies shows how varied — and competing — these priorities can be.
Here’s a look at all the things current retirees are doing with their money, plus expert-backed steps to decide what to tackle first.
What Retirees Are Doing With Their Money
The Transamerica report found that retirees are directing funds across several goals and needs, often at once:
- 41% are paying off debt, including credit card debt (28%), mortgages (20%), other consumer debt (8%) and student loans (2%)
- 33% are building emergency savings
- 27% are just able to cover basic living expenses
- 27% are continuing to save for retirement
- 21% are creating an inheritance or financial legacy
- 20% are paying healthcare expenses
- 19% are saving for a major life purchase or life event
- 16% are providing financial support for other family members, including children (8%), grandchildren (7%) or parents (1%)
How To Prioritize Your Retirement Money
With so many competing priorities, it’s vital for retirees to create a financial plan.
1. Fund Essentials First
The first priority should always be to have a plan for covering basic living expenses.
2. Attack High-Interest Debt Next
When it comes to debt repayment, focus on high-interest debt, such as credit card debt.
“That’s going to be a top priority to get that paid down because that can easily roll out of control,” said Catherine Collinson, CEO and president of the Transamerica Institute.
Structured debt, like a fixed-rate mortgage, doesn’t need to be prioritized as highly. On the other hand, “if it’s an adjustable-rate mortgage that is going to reset in the near future to a higher rate, that’s something that requires diligence and homework,” Collinson said.
3. Build Liquid Savings
Continuing to build savings — including emergency savings and retirement savings — should be the next priority.
4. Defer Legacy Goals Until Core Needs Are Secure
While retirees may want to set aside money for children and grandchildren — both now and as an inheritance — this should be low on the priority list.
“Retirees have got to think about themselves first,” Collinson said. “Any debt that they need could counter any benefit of saving for a legacy.”
Tips for Paying Off Debt in Retirement
If you have debt in retirement, it’s important to get a clear picture of exactly how much debt you owe and what your sources of income are. Next, look for ways you can reduce expenses — at least temporarily — so you can funnel more money into paying down debt. It’s also worth calling your lenders to ask for whatever assistance may be available.
“If you don’t ask, they can’t say yes,” Collinson said. “If you have high-interest-rate credit card debt, contact the lender to see if there’s a way that you can either restructure that debt or lower the interest rate. The answer may be no, but nothing ventured, nothing gained.”
Come up with a plan to pay down your existing debt, whether you prioritize by interest rate or balance, and avoid taking on new debt during this phase.
Tips for Saving More Money in Retirement
The best way to save money in retirement is to consistently live below your means. Look for creative ways to cut back on discretionary expenses, such as gifts for loved ones.
“If they’re strapped for cash, rather than buying a gift that costs a lot, find ways to give things that are from the heart and may not even cost anything, or pool resources together with other family members,” Collinson said. “One of the most important things that retirees can do is put themselves first to help alleviate the risk of running out of money.”
Retirees are managing more than one financial goal at once. A simple, priority-driven plan — essentials, high-interest debt, savings, then legacy — helps keep your money working for you, not against you.
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