4 Ways To Ensure You Stay Wealthy Through Your Full Retirement

Retirement is often seen as an ending — to work and to generate new income. But hitting retirement age doesn’t mean drawing a line under your savings. In fact, continuing to add streams of income is the best way to not only build wealth in retirement, but to maintain it. 

Below are a few tactics for maximizing your nest egg. Also check out what empty nesters should stop investing in to boost their retirement savings.

For many older adults, investing in stocks can feel scary due to their volatility. Because retirees need to meticulously plan their spending to ensure they don’t outlive their remaining savings, many naturally veer to a more conservative allocation strategy.

While investing in low-risk assets like bonds, CDs and money markets can feel like a safer bet, the truth is that retirees are more likely to outlive their wealth with a more conservative strategy. According to an analysis by Merrill Lynch, a 65 year old female retiree has a 97% chance of having enough wealth to last her life with a 50/50 bond-stock allocation, versus an 83% likelihood when invested fully in bonds. 

One of the biggest dangers to retirement savings is inflation, which, compounded over several years, can quickly eat away at a retiree’s purchasing power. As retirees increase withdrawals to catch up, many will see their savings drain away over time. While social security payments increase annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, advocacy groups note that this calculation is based on the spending habits of younger adults and doesn’t factor in how much older adults spend on healthcare costs. 

While neither social security checks nor your portfolio’s rate of return are guaranteed to match the true inflation rate to retirees, rents often do (and sometimes exceed). For this reason, becoming a landlord can be a solid investment strategy for retirees. Even for those that don’t own a rental unit, many can pull in extra money subletting or AirBnBing their home while traveling — an income stream that can help stave off dipping into retirement savings too often. 

Just because you stop working doesn’t mean you stop having to pay taxes (sadly). Furthermore, retirees with a traditional IRA or 401(k) face required minimum distributions (RMDs), which the IRS taxes as ordinary income. To reduce the tax burden from withdrawals, retirees need to talk to a CFP about their strategy going forward.

Actions such as donating a portion of withdrawals to charity or converting to a Roth account can potentially reduce the tax bill. For retirees with several accounts, it’s also worth looking into what order of accounts they withdraw from — whether they start by taking money out of a Roth, or traditional 401(k). 

A house that suited you in your 30s and 40s might not fit your needs as you age. Perhaps it’s just “too much house,” or some of its features — lots of stairs, a long drive to the supermarket — are less appropriate for an older adult.

No matter your needs, retirement is an ideal time to reassess what you’re looking for in a home and bring down costs. It could also be a good time to move to an area with a lower cost of living. Even for those who decide to stay put, renting out spare bedrooms can generate some much needed extra income.