If you've been in the workforce for decades, you might be looking forward to kicking your feet up and living retirement on your terms. But as you get closer to the big moment, your nerves may start to set in as you try to figure out what type of retirement you'll be able to afford.
If the thought of hanging up your career keeps you up at night, here are a few benefits you might be overlooking.
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1. Start getting tax-free income from a Roth IRA
If you've contributed money to a Roth IRA during your earning years, you'll be able to reap the benefits during retirement. As long as you have reached age 59 1/2 and have met the requirements of the five-year rule, you'll be able to withdraw your earnings 100% tax-free.
Check your Roth IRA balance to see how much money you'll have to look forward to during retirement. If you need to beef up your savings and you meet the current Roth IRA income requirements, take advantage of the opportunity to contribute while you're still earning money.
For 2024, you can tuck away up to $7,000 in a Roth IRA if you are under 50 and up to $8,000 if you are older. Right now, you can still contribute up to $6,500 to a 2023 Roth IRA if you're under 50. You can throw in an extra $1,000 if you are 50 and older. You have until April 15 to fund a Roth IRA for 2023.
The more money you stash away in a Roth IRA, the more tax-free money you can potentially unlock during retirement. You'll just want to make sure you invest the money in your Roth IRA -- say, in dividend-paying assets so you can set yourself up for a steady stream of tax-free income every month.
2. Keep earning money after you retire
After you retire, you don't have to call it quits in the workforce completely. If you loved what you did at work but don't want to do it 40 hours per week, you could pick up a side gig doing something similar.
Or, if you've always wanted to try something new or start a business, this is your chance. Some funds from an IRA could get your business off the ground or you may be eligible for a business credit card once you start making money. But it's probably a bad idea to look into credit cards if you're already swimming in debt and don't know how to manage them. A business credit card, however, could pay off if you are good at managing your money and want to unlock some big bank bonuses and rewards points.
Before you start earning extra money in retirement, you should be aware of how it can impact your financial situation. The good news is that you can still receive Social Security benefits while you're working. But If you haven't hit full retirement age yet, you'll only be able to earn up to $22,320 in 2024 before the Social Security Administration reduces your benefits. After you've reached full retirement age, there's no cap on how much you can earn while on Social Security.
3. Enjoy traveling when you want
More than 3 in 5 American workers (65%) who are 50 or older rank travel as a retirement dream, according to the 23rd Annual Transamerica Retirement Survey.
The good thing about retirement is that you most likely won't be bothered with the time constraints that may have limited your travel while you were working. You'll have a lot more time on your hands to travel on the cheapest days and take advantage of travel perks. For example, if you have a travel credit card, you could rack up points that can unlock exclusive travel deals and free accommodations. But you'll want to make sure you have good credit and a nice chunk of cash in savings to qualify and reap the full benefits of your travel credit card.
Retirement can be one of the most exciting times of your life if you set yourself up for success now. Before you take the plunge, start saving more, practice living on less money, and create a retirement game plan so that your finances won't experience a shock when the paychecks from your job stop rolling in. If you make the right moves now, you'll have a ton of benefits waiting for you later.
