Protect & Prolong Your Retirement

The global market recovery is limping along, however, near-zero interest rates have plagued bond returns and potential growth in retirement income. Current retirees and baby boomers looking to make a final push for extra savings don’t have much time for retirement funds to recover from the last recession.

If the economy and federal budget situations weren’t worrisome enough, changes to the government-backed programs offering a financial safety-net to seniors and retirees, will ask those living on a limited income to make do with less. And with the arrival of millions of baby boomers turning 65 and joining the ranks of entitlement program beneficiaries, we face real challenges in protecting retirement savings and prolonging income for the long term.

Seniors and their families should consider the following six strategies to protect themselves from the financial storm that’s is a volatile world market.

6 Ways to Protect and Prolong the Use of Your Retirement Safety Net

1. Understand Your Social Security Benefits

Learn more about the social security benefits offered to your and/or your spouse. Benefits can begin as early as age 6, however, if you wait to extract benefits, your total amount may rise by about 8 percent a year – plus cost of living adjustments for inflation – until age 70. Speak to your financial planner and tax expert to learning about when to claim benefits, and which benefits to claim.

2. Max out your 401k and IRA Contributions

This is your last chance to save! Make sure you are maxing out your individual retirement plan contributions. Take advantage of any employer matches in 401k contributions. And refrain from taking lump-sum distributions of retirement funds when you change jobs – unless you desperately need the money to meet current financial obligations, roll over the accounts and continue to build your nest egg. This way you also avoid paying taxes on early distribution of retirement funds (often a stipulation of investment income received before a certain age, 65 and up).

3. Take Advantage of Available Tax Breaks

Be sure to understand and take advantage of the deductions available to reduce your income taxes each year. These are some of the common deductions retirees and seniors should be reviewing with their trusted tax planner or financial advisor.

  • Some medical and dental expenses are deductible up to a certain limit – this may include health insurance premiums, long-term care insurance premiums, prescription drugs, nursing home care, and most other out-of-pocket healthcare expenses.
  • Some retirement plan contributions and withdrawals are tax-deductible or tax-free. Make tax-deductible contributions to retirement plans such as traditional IRAs, Roth IRAs, and 401(k)s. Or, if prefer to contribute to a Roth IRA remember that you must pay taxes on the income you contribute now, but the interest earned or income withdrawn upon retirement are tax-free. And don’t forget about your tax-free and tax-deferred insurance policies and annuities.
  • Deduct your investment expenses. Earn money when you retire with income from investment interest, dividends, and capital gains. Unlike income from a job or business, these types of income are not subject to Social Security or Medicare taxes. You may also be eligible for credits on money spent for investment advice or accounting services – including but not limited to attorney fees, safe deposit box fees, subscriptions to investment newsletters and fees to financial planners, brokers, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock.

**Note: you cannot deduct fees paid to broker who acquires investment property, such as stocks or bonds. You must add the fee to the cost of the property and recoup any fees through the sell.

  • Deduct any expenses accrued for running a business. Running your own business or being a self-employed consultant is a great way to get tax deductions for necessary expenses you incur to do business – business travel, the cost of business equipment such as computers, and expenses for use of outside or home offices.
  • Charitable contributions of up to 50% of your adjusted gross income always earn you an itemized tax deduction.
  • Shop for More Affordable Health Insurance or Medicare Policies

Millions of seniors augment basic Medicare protection (parts A and B) with supplemental policies (part C) and drug coverage (part D) from private insurers, however, few seniors comparison shop for better rates and coverage terms for these private policies. When your policy is up for renewal (usually during the fall), speak with an unbiased broker to search for more affordable premiums and quality services.

5. Make Use of Free Medicare Services

The Affordable Care Act (Obamacare) expanded the free and reduced-price preventive health procedures for Medicare policyholders. Aside from the required 10 essential health benefits (ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and facilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care), Medicare participants are entitled to a free wellness visit with their personal physician and other preventive health care services. Use them! You are not charged for these services, nor with they because your premiums to go up, so take advantage of these services to keep your health insurance expenses low.

6. Cut Your Personal Expenses

If you don’t have a traditional pension or large nest egg, it’s likely that you will need to closely monitor your spending in retirement. One of the simplest things you can do to make sure you stay financially viable during retirement is pay attention to your spending.

Whether you are in the midst of retirement or you are just planning ahead, consider make cuts to your spending in the following areas to prevent unnecessary expenditures and financial worries down the road:

  • Credit cards – It is not to say you can no longer use credit cards, but as you will likely have to adjust to living on a fixed, lower income it is smart to approach their use differently. Make sure you are only buying what you can afford. Don’t carry a balance on a charge card. And be willing to look at new offers if the credit card fee structures or payment agreements do not match your financial abilities.
  • Technology – Don’t sign up or pay for any cable TV, phone service or internet data packages you aren’t going to use. Consider slimming down paid movie and sports packages, or try a cheaper alternative online.
  • Travel & Leisure Avoid recreational activities that involve spending a lot of money. Travel tends to increase during the early years of retirement, so keep costs low by adjusting your travel itinerary or shopping around for the cheapest airline seats and discounted hotel rooms. And pass on the casinos, lotteries and gambling once you’re on a fixed income – it will be harder for you’re to bounce back from any unexpected losses.
  • Food – You can’t cut out food, but you can control your monthly food budget. Buy the generic or store-brand items instead of brand names, buy only what you need, and use coupons or membership discounts whenever possible.

As you approach retirement, you have to be thinking long-term. You will be out of the workforce for 30, 40 or even 50 years, and likely unable to earn more income beyond your investments. Look at what you can afford to do and balance it with what is important to you.

Protect your life for the many long years you plan to live beyond retirement – speak with a retirement planning or wealth management expert to protect your current retirement funds from economic downturns and find extra savings wherever possible.

Skip to content