In recent years, workers have experienced their fair share of hiccups on the road to retirement savings. Rampant inflation has made it difficult for a lot of people to fund their nest eggs. And the pandemic forced a lot of people to take a temporary break from the labor force.
As such, it's not that surprising to learn that 28% of workers today think they'll have no choice but to live frugally as retirees, according to data from Natixis.
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Of course, many people make an active choice to cut back on spending in retirement and live simply. But living frugally can mean different things.
It's not so bad to cook dinner on a regular basis rather than dine out as a retiree, because the latter is far more expensive. It's another thing to have to pinch pennies at the supermarket or cut back on essentials when the cost of eggs goes up.
If you don't like the idea of having to stick to a strict budget in retirement, then it's important to save as much as you can. But if you're nearing retirement with limited time to pad your savings, there's another decision you can make that might improve your financial outlook.
Plan to keep working
Many of us are wired to think of retirement as a time to stop working. In reality, there are plenty of benefits to holding down a job as a retiree, and the gig economy makes work even more flexible these days.
You might assume you'll be resigned to a frugal lifestyle because you don't have much savings and you'll largely be limited to Social Security once your career wraps up. But what if you were to boost your monthly income by $500 or $600 by holding down a part-time job you can do at your own leisure? Suddenly, you might have the leeway to dine out once a week, pay for social events, or even just breathe more easily during those periods when your medical bills are higher.
Plus, working in retirement might actually be a good way to stay busy. When you're short on funds, staying occupied all day long can be a challenge. If you work, you'll be filling some of those hours without having to spend a dime.
And you never know what sort of social outlet a job might be. Many retirees struggle with the feeling of loneliness. They miss the camaraderie of an office and the casual discussions with colleagues. You may decide that instead of a flexible gig, you actually want to take a more traditional part-time job in retirement so you can develop relationships with the people you work with and have some consistency in your schedule.
Don't assume you'll be unreasonably limited in what you can spend
You may have to shrink some of your spending in retirement once your full-time paycheck goes away. That's not so uncommon. But you may not have to cut back to the extreme you're anticipating.
If you're willing to work in some capacity, you can not only use the money you earn to cover expenses, but also leave your limited savings intact longer. That might allow you to benefit from added investment gains.
All told, working in retirement can be a very beneficial thing. And it's an especially good thing to consider when you're anticipating a retirement full of financial restrictions.
