If you are like most people with a pulse, you wouldn’t turn down the opportunity to have more money during your retirement.
This is not an illusion, according to Paul Merriman of MarketWatch, and it is can be so easy that most people can achieve it.
There are 11 ways that you can put yourself on a path for more cash during your golden years.
1) Postpone your retirement by 5 years.
If you work 5 years before you retires, there are several benefits. First of all, you end up with 5 years worth of additional savings. Second, you add potential market gains. And, third, your retirement portfolio has 5 years less to support your retirement.
There is a good chance these 3 factors working together could double your retirement nest egg.
2) Get Bigger Checks
By postponing your retirement, or simply electing to postpone the date you begin to receive your Social Security benefits, you can collect more from SS. By waiting until the age of 70 to start collecting benefits, you will collect 32% more than if you had started at the age of 66, and 76% more than if you had started collecting at 62.
Postponing SS benefits could be beneficial to your spouse as well, because chances are one of you will die first. And since men, typically go first, your spouses benefits are based on yours – and if yours are larger, then your surviving spouse will be bigger too.
3) Take Less From Your Portfolio
By simply taking 4% from your portfolio instead of the standard 5% every year, there would be more left in the portfolio over the long term. A lower withdrawal rate also reduces your risk of running out of money. This won’t work for everyone, but if you have been diligent, you will have saved enough to live well on the 4% payouts.
4) Do Anything You Can To Increase Your Returns
Most investors pay unnecessarily high expenses. Even when they are carefully hidden, mutual funds’ expenses inevitably take money away from you.
All funds are NOT created equal when it comes to operational expenses and the costs of portfolio turnover. This information (easy to obtain for any mutual fund) can make a big long-term difference in your returns.
The simple decision to invest in index funds tackles these two troublesome expense areas and can give you extra 1% (or more) annual return from owning essentially similar assets.
In taxable accounts, index funds give you an extra bonus: Lower turnover means fewer capital gains and thus lower tax bills.
5) Settle For Lower Returns and Lower Risk
We all know that stocks have higher long-term returns than bonds. But stocks have the potential to leave investors with severe losses. To learn the real-life impact, they have compared two retirement portfolios, each of which paid out 5% each year adjusted for inflation.
The higher-paying all-equity portfolio (the S&P 500 Index) ran out of money in 23 years. But a portfolio made up of 40% lower-yielding bond funds and 60% of properly diversified equity funds was able to keep producing inflation-adjusted distributions for 44 years. Here’s a clear case in which less (lower returns and lower risks) turns out to be more.
6) More Is More
When investors are too conservative, they leave money on the table with only minimal benefits to show for it. When tracked, the results of two retirement portfolios that made inflation-adjusted 4% distributions, there was an enormous difference between having 30% in equities versus 40%. After 44 years the more conservative 30% portfolio was worth $1.7 million; the 40% one was worth nearly $5.1 million.
Interesting point: You’d never imagine such a big difference from just the annual return figures: 8.3% for the 30% allocation versus 8.9% for 40%.
7) Even If You Have Messed Up Along The Way, There Is Still Hope
If you’re in that situation, depending on your age, you may be able to get a 6% to 8% payout through an immediate life annuity. And if you buy an annuity from a low-cost provider, you may do even better than that.
8) Get Out Of Unproductive Asset Classes Immediately
If you have a significant part of your portfolio in gold, commodities, penny stocks or technology stocks, you’re probably not making the money you could and should. The sooner you do a better job of investing, the sooner you are likely to have more money to save and spend.
You might not necessarily lose money in these investments. But for the past 50 years, they have underperformed the other asset classes that are out there. If this describes you, what are you waiting for?
9) Pay Less In Taxes
You will have more money to spend if you pay less in taxes. Too many retirees withdraw money from their tax-deferred money before they tap into their taxable accounts.
Granted, taxes can be complicated. But in most cases, (see your tax adviser if you’re not sure) it makes sense to let tax-deferred accounts build up in value while you gradually liquidate taxable ones.
10) Be A Better Shopper
Whether you’re already retired or still working toward that goal, I feel safe in guaranteeing that you’ll have more money to spend if you become a better shopper. If you haven’t focused on this, you might be surprised at how easy it can be.
Of the hundreds of books on this topic, here are two: How to Retire the Cheapskate Way: The Ultimate Cheapskate’s Guide to a Better, Earlier, Happier Retirement by Jeff Yeager , and The Lazy Couponer: How to Save $25,000 A year in Just 45 Minutes Per Week with No Stockpiling, No Item Tracking, and No Sales Chasing! by Jamie Chase.