Articles, Retirement

Intelligent Ways to Make Your Retirement Savings Last

Written By: Charity Jerop
Reviewed by: Mike Reyes
Last Updated October 21, 2022

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a retired senior citizen couple searching for travel discounts online

Are you looking for strategies to make your retirement savings last? There is no better time to plan for retirement than now. The future is uncertain, and the markets are unstable. Planning your retirement as early as now will set you up for stress-free retirement years. A rock-solid retirement strategy ensures you lead a quality life after your career. 

A recent study shows that an American has $164,944 in retirement savings. People have different goals regarding retirement; some feel they’re ready to retire before 60, and others plan to work beyond that. Regardless of when you want to retire, the big question is, how will you make your retirement savings last? There are options to make your savings last but first, check out some of the best retirement plans. 

What are The Best Retirement Plans?

a man smiling as he's making his retirement savings last

There are different ways to save for your retirement, whether you’re employer-sponsored or saving individually. Below are the saving options you can channel your funds to fund your post-work years. 

401(k) Plan

401(k) retirement plan is a saving plan that helps you automatically save a percentage of your net income. Technically, you contribute a certain amount of money per year through your employer. 401(k) terms can vary depending on your employer; some offer a generous match, while others don’t provide it. A 401(k) match is where your employer can contribute the same amount as you contribute up to a specific percentage of your annual earnings.

This retirement plan is one of the best because it offers some tax benefits. There are two options: traditional and Roth 401(k). With the standard 401(k) plan, you can save a portion of your pre-taxed money. Your savings will grow tax-exempt until you withdraw them at retirement. The gains earned on this account are taxable earnings, and you’ll have to remit taxes upon withdrawal. Notably, you might have to pay penalties and taxes if you get an emergency and withdraw your savings in this account before you turn 59 ½.

Roth 401(k)

Roth 401(k) works similarly to the traditional plan. However, with this retirement saving plan, you contribute funds after remitting your tax dollars. The best thing about this retirement savings is that any gains, including dividends, interests, and capital gains, are tax-free. 

With 401k, your money goes towards high-return investments like stocks, bonds, money market funds, and bank deposit accounts. 401(k) plans can also help you access affordable loans besides tax-deferred benefits and matching contributions. 

What is The 401(k) Contribution Limit?

According to the law, you can contribute your savings up to a specific limit per year. Technically, you can contribute up to $20,500 on employee elective deferrals or a $6,500 catch-up contribution if you’re over 50 in 2022. What’s a catch-up contribution? This is the maximum amount an employee above 50 can contribute on top of their regular 401(k) plan.

IRA Plan

Individual Retirement Arrangements is a federally-backed retirement plan for individuals, and this is another tax-advantaged option to help you build a sustainable nest egg for the future. Different IRA plans include Traditional and Roth IRAs, Payroll Deduction IRAs, Simplified Employee Pension Plans, Spousal IRAs, Rollover IRAs, SIMPLE IRAs, and SERP plans. However, let’s check out the Traditional and Roth IRAs and how they can benefit you during retirement.

Traditional IRA

Traditional IRA is the same as a traditional 401(k) plan, which means you make contributions with pre-tax money, lowering your tax obligations now. The funds can also grow tax-deferred until you withdraw them at retirement. And like any other government-backed saving plan, early withdrawal of funds in a Traditional IRA can lead to hefty penalties and taxes. 

In addition to substantial tax benefits, Traditional IRAs offer opportunities to diversify your funds across dozens of investments, including bonds, stocks, real estate, certificates of deposits (CDs), etc. How much money can you save in a Traditional IRA per year? You can save up to $6,000 pa or $7,000 per year if you are over 50.  

Do you prefer to enjoy tax-free savings later? Enter Roth IRA!

Roth IRA

You can capitalize on this excellent retirement plan for individual retirement savings. This is the opposite of the Traditional IRA, which means you contribute dollars after paying tax. In exchange for this, you can enjoy massive tax benefits on your principal contributions and earnings. 

Furthermore, your savings can grow tax-free, and you’re in charge of when to withdraw your savings. Ideally, early withdrawals on your contributions are tax and penalty-free. And like the Traditional IRA, the maximum amount you can stash in this account per year is $6,000 or $7,000 for people older than 50.


Have you ever heard of Traditional Pensions? Unlike the 401(k) plan, your employer funds these retirement savings. There are defined benefit and contribution plans, and you can choose. With a defined contribution, you can be sure of getting a monthly payment or lump sum after retirement. On the other hand, a defined contribution is a plan where your pension benefits go into an investment account, and you can access the funds upon retirement.

Cash Balance Plan

Like pension plans, a cash balance plan is another excellent option for retirement savings. Ideally, this retirement plan is more like a defined benefit, providing you with a stated amount of money at retirement. You can sign up for a cash balance plan and 401(k) plans simultaneously or in place of the other. The amount you can get during your post-work years depends on factors like the number of years working, interest credit, wages, and pay credit. Since this is a qualified retirement plan, you can bolster your nest egg while lowering your tax liability as an employee. 

You can choose between a huge-sum withdrawal or an annuity benefit; an annuity benefit plan guarantees you a lifetime monthly check, meaning you don’t have to worry about income once you retire. Notably, the more years you work, the higher the savings, and your limit increase with age. 

How Much Money Should You Save for Retirement?

Understanding the savings you need for retirement is crucial to planning your retirement. The amount you should put aside for retirement depends on your post-work expenses. Typically, your retirement expenses can revolve around living expenses, family care, medical health, transportation, and housing. You need to figure out the numbers to determine the funds you need to retire and live a comfortable life. One more straightforward way to estimate your retirement savings is to use the 4% rule. Take the 4% and multiply it by your desired monthly income during retirement. For example, if you want an income of $70,000, you will need savings worth $1,750,000. 

Remember, some factors can impact your retirement savings, and these risks include investment, inflation, long-term care, taxes, etc. Knowing how these factors affect your retirement funds is crucial to creating a plan with minimum risks. 

Experts recommend keeping savings that will fund 80% of your monthly income. For instance, earning $100k, you should aim for at least $80,000. However, the amount can differ depending on your age, working years, and interest rates. 

How Can I Make My Retirement Money Last A Lifetime

You could expect your savings to last a lifetime in a perfect world. Unfortunately, we don’t live in such a world, and the reality is that your accumulated savings may or may not finance your retirement life. However, there are ways to stretch your retirement money to last a lifetime. Below are excellent strategies to help maximize your nest egg.

Take Your Distributions Wisely

a senior planning money before retirement

Here is the thing, your savings mature once you retire, and this means you can safely withdraw your funds without worrying about hefty penalties and taxes. And seeing money in your account can be exciting. Depending on your retirement saving plan, there are different options for withdrawing your retirement savings, and your choice can make or break your wallet. Typically there are five distribution options for your retirement savings.

You can take the minimum amount annually, purchase an annuity, make periodic withdrawals, roll the money into another savings account or take a lump sum amount. Purchasing an annuity, for instance, is an excellent strategy to make your savings last, and you’ll create a guaranteed income for the rest of your life. A lump sum distribution may not be the most stable option compared to annuities and Roth accounts.

Invest in Health Savings Account

Healthcare costs can be pretty expensive and get more costly with age. A recent study shows that healthcare expenses for retirees have gone up by 5%, and they can expect to spend $315,000 on average in medical expenses. Health care and medical expenses are the costliest after living and housing expenses, which can deplete your retirement savings early. 

Setting money aside for your healthcare expenses in the future can be a smart move. One of the best options is to invest in Health Savings Account (HSA), and this is another good retirement plan to help you take care of medical-related costs like dental, eye-care, and doctor’s visits. 

The exciting thing about this retirement plan is the tax benefits it offers. A Health Savings Account provides three tax advantages. First, you save pre-tax money into your account, meaning the deductions made through your payroll won’t be subject to most states’ or federal income tax. Any interests and earnings accrued in your HSA account are tax-free. Furthermore, any amount you withdraw from your account for health-related expenses is tax-free. 

Another benefit of HSA is that it is an investment account, and you can invest in bonds, stocks, treasuries, ETFs’ mutual funds, etc. Investing your HSA funds can help you earn, boosting your savings for health care. 

Stay in control

Additionally, you’re in control of your HSA; you can decide what amount to put away and which medical expenses to pay with your Health Savings Account. Plus, it is your money, and you can roll over any unused funds in your HSA to the following year. And lastly, you can take out this many and use them for any other purpose without penalty when you hit 65 years. 

Health Savings Account is an excellent idea to stretch your retirement savings, and you can sign up for it with other retirement plans like 401(k). 

Use The 4% Thumb Rule

Are you looking for ways to make your retirement savings last longer than 30 years? Adopt the 4% rule! How does it work, you ask? Coined by William Bengen, a financial advisor, the 4% rule is a retirement strategy aiming to make your savings last several decades after retirement. 

According to William Bengen, the 4% withdrawal rule is a sustainable way to get income during retirement while accounting for inflation. It is a straightforward rule that guarantees a consistent payment for up to 30 years post-work. This savings distribution rule is straightforward; Withdraw your money at 4% of your savings during the first year, and adjust the withdrawal rate in the subsequent years to account for inflation.

For example, if the inflation rate goes up, you can expect to withdraw a higher amount than the first year, and should the inflation rate go down, the amount drops as well. You can adjust your inflation rate to 2% —the Fed Reserve’s target inflation rate. The 2% inflation adjustment strategy gives you predictable income during your retirement period, while the adjustable-rate matches your withdrawals with the inflation rates. 

The 4% rule is the simplest way to maximize your retirement savings. Enjoy consistent income without worrying about depleting your retirement money. 

Don’t Take Social Security Early

Social security is another retirement saving plan to count on when you retire. It can replace a percentage of your pre-retire income, depending on your lifetime earnings, the date you signed up for social security, and your monthly earnings. You earn credits towards social security benefits when you remit social security taxes. 

You can get these benefits when you hit your Full Retirement Age (FRA). Ideally, an FRA for someone born in 1956 is 66 and four months, and FRA for folks born in 1960 or later is 67 years. Withdrawing your social security before maturity can be a grave financial mistake, as it impacts your benefits. Technically, you lose as much as 30% in benefits because this program depends on your retirement age.

Contrary, if you wait until retirement age, you can be confident of getting more considerable benefits. People who wait until 70 years to take their social security qualify for delayed retirement credits, equating to the most significant social security benefit. Since social security is one of the many retirement plans you can hold, it is best not to touch the funds until you’re eligible for full benefits. You’ll have more funds to last you a while during retirement.

Clear Your Mortgage Early

mortgage hack

To make your retirement savings last, you need to cut expenses. Unfortunately, data shows that 44% of retirees have a mortgage, and 17% think they may never afford to clear this debt. Housing can be expensive, and having a mortgage to worry about during retirement can stretch your savings. Focus on paying off your mortgages to lower expenses during your post-career life. 

Having peace of mind during retirement is essential; you can achieve that when you don’t have mortgages to stress you. What’s more? Settling your mortgage before retirement can save you on interest rates, which can run into tens of thousands of dollars, and you can channel these savings on interest for other uses. Importantly, retiring without mortgages to pay reduces your baseline expenses, which is an ultimate goal for every retiree. 

So how do you clear your mortgage early before retirement? You can choose to refinance your long-term mortgage rate and get a better, shorter, and more affordable rate option. You can consider paying off the principal with partial monthly lump sums if there are no prepayment penalties. 

Maximize on Cashback and Rewards

Did you know you can make the most of your credit card to fund your retirement? Cashback credit cards offer money back on purchases, and you can use these rewards to bolster your savings account. Some cashback card companies can allow you to move these rewards into a brokerage account, which you can transfer into your tax-advantaged retirement account. 

A reward card provides a percentage of the money you spend on shopping, traveling, dining, etc. Various cashback cards offer different reward categories to match your spending. For example, a flat-rate cashback credit card can offer 1.5 to 2.5% money back on any purchase. You can also consider a credit card offering the highest cashback on rotating categories, and you can rake up to 6% on purchases in those categories. Tiered-rate card provides a combination of flat-rate and rotating card categories. 

How do you redeem cashback cards for retirement savings? Cashback cards have different options to convert your rewards. You can qualify for a statement credit or check in the mail, and you can go and deposit it into your brokerage accounts. The best way to channel all the rewards into a brokerage account is to sign up for cashback credit cards offering automatic deposits. 

An excellent option is the AmEx Platinum Card for Schwab, which offers 100,000 reward points after spending $6,000 during the introductory period. Turn it into a free (or nearly free) trip to Italy, or Australia and earn 1.5% on all eligible spending when shopping with this cashback reward card. Additionally, you can get other rewards, including 5x points, hotel, airline, and entertainment credits, and up to $200 annual statement credit. To capitalize on this card, you need to be a Schwab investor, and you can roll over rewards to your investment account.

Build Income Streams for Retirement

Retirement means you won’t have that regular paycheck, and you must plan how to replace that income and live stress-free. Creating various income streams to support you during retirement is another excellent way to boost your savings. It doesn’t necessarily mean you’ve to start a demanding business or get another job after retirement; you can put your retirement savings to work and fund your retirement lifestyle with the earnings. 

Consider various factors before investing in your hard-earned retirement savings. Some things to consider are investment risks, growth potential, flexibility, and guaranteed income. Investing in rental properties is an excellent way to create income streams for retirement, and investing in rental properties can help you earn income now and in the future when you retire. 

The thumb rule is to buy your properties before retiring, and you can leverage other people’s money, i.e., a mortgage. The best thing about having rental properties is you can enjoy tax benefits and you could earn 8% plus ROI annually. 

Another income stream to consider is dividend stocks; use your brokerage or retirement savings account like IRA to buy shares at a public company. The company will pay you dividends at the end of the year for as long as you hold the shares. Companies like SoFi can help you invest in shares and ultimately earn bonuses. You can also look into annuities, bonds, and certificates of deposit (CDs). 

Stick To A Retirement Budget

You can earn all the time but struggle to keep up with retirement expenses if you don’t have a budget. Retirement can offer you much free time, making you want to trot the globe, experience new things, places, and live life to the fullest; all these require funds and can deplete your savings if you don’t have a budget.

First, establish a list of your retirement expenses and understand your spending habits. Retirees spend 34% of their income on housing, 15% on healthcare, 11% on food, 16% on transportation, and 5% on entertainment. You can use the popular 50/20/30 budget rule to manage your retirement income. Importantly, stick to your retirement budget. 

The Takeaway

Planning your finances early on is crucial to be retirement-ready when the time comes. Hopefully, the above tips can help you achieve your dream retirement life. Capitalize on the many less risky investments and guarantee earnings when you retire.

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