Seniors experience their share of financial worries. Given that many are forced to live on a lower income than what they're used to, that's understandable. Here are a few ways to enjoy retirement to the fullest without having to stress about money all the time.
1. Save from an early age
Retirement may not be on your radar when you're in your 20s and focused on establishing your career, paying off debt, and saving for a home, but it should be. The sooner you begin saving for your senior years, the more time you'll give your money to grow, thanks to the power of compounded returns. When you invest the money in your IRA or 401(k) plan, it grows every year, at which point you can then reinvest your gains for added growth over time.
Image source: Getty Images.
Imagine you start socking away $400 a month in a retirement plan at the age of 25, with the goal of retiring at 67. If your investments deliver an average annual 7% return, which is doable with a stock-focused strategy, then you'll end up with around $1.1 million in savings.
Watch what happens if you don't start saving until age 30. In that case, you'll accumulate about $770,000 in your retirement plan, assuming that same monthly contribution and rate of return.
Now, $770,000 isn't shabby at all, but it's also not $1.1 million. By not starting to save five years earlier, you'll miss out on a good $330,000 in retirement savings, despite the fact that you'll only end up making $24,000 less in contributions ($400 a month over 60 months).
2. Be smart about Social Security
Social Security may only end up constituting a portion of your total retirement income, but it pays to get as much money out of it as possible. One way you can do that is to file at the right time. You're entitled to your full monthly benefit based on your personal earnings history at full retirement age, which you'll reach at 67 if you were born in 1960 or later.
You can also delay your filing past full retirement age and grow your benefits by 8% a year in the process, up until age 70. Any boost you snag will remain in effect for the rest of your life, so it's worth looking at delaying your filing, especially if you have lofty goals for retirement, like traveling a lot.
3. Prepare for healthcare costs
Healthcare could end up being your greatest retirement expense, and saving for it specifically could help you avoid financial worries later on. It's estimated that 66% of seniors spend $376 or more on healthcare each month. You can prepare for that by maxing out a health savings account (HSA) during your working years if you're eligible.
An HSA lets you set aside money for both near-term and long-term healthcare expenses. In other words, you can withdraw from your account to cover immediate medical bills, but any money you don't need right away can be invested and carried forward indefinitely. If you begin funding an HSA at a relatively young age, you might grow your balance into quite a large sum by the time retirement rolls around.
You shouldn't spend your senior years worrying about money. Rather, you should use that time to make memories with family, enjoy hobbies, and do whatever else makes you happy. Take these important steps, and you'll set yourself up for the relaxed retirement you deserve.
