Conventional wisdom says to save for retirement while you’re employed to build a nest egg big enough to provide income for the decades that will hopefully follow your last day of work.
If you do it right, the logic goes, you’ll never have to worry about working or saving again once you retire — but another school of thought says that saving should be a lifelong habit.
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There are several ways that baby boomers who are already retired can continue to grow their savings in 2024 and beyond to boost their lifestyle, prepare for a longer-than-expected life or higher healthcare bills, increase the estate they plan to hand down to their heirs and enjoy a greater level of financial security so they don’t outlive their money.
The even better news is that most of them can do it without sacrificing too much while watching their savings grow. GOBankingRates spoke to two industry veterans who outlined how boomers can simultaneously build their savings while living off their savings.
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Invest In Short-Term T-Notes
All retirees should know that one of the best ways to boost their savings is also one of the safest — in fact, it’s as close to risk-free as an investment can be.
“Retirees can invest in short-term Treasury notes, which are yielding around 5% right now and are fully guaranteed by the federal government,” said certified financial planner Bryan Schod, managing associate of Luttner Financial Group, a Pittsburgh-based private wealth management firm.
You can buy T-notes that mature in two, three, five, seven or 10 years at TreasuryDirect.gov. The current rate for 10-year notes is 4.375%, and once you make your investment, your rate can never change.
“Treasury notes can be locked in for a period of time to reduce the risk of your interest rate dropping,” said Schod.
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Stash Your Cash in a Money Market Account
Investments like T-Notes pay solid returns but lock up your savings in an illiquid asset. But boomer retirees can get returns that are just as good or better while retaining full access to their money in an account that gives them the utility of check-writing and ATM withdrawals, which most savings accounts don’t offer.
“They can use money markets, which are yielding 4% to 5%, as well,” said Schod, whose smallest client is a social worker in her 20s making $50,000 a year and whose biggest owns a major sports franchise.
Currently, Quontic offers a 5% APY money market account and Vio Bank offers 5.3% — “currently” being the keyword. The tradeoff is that money market accounts don’t let retirees lock in rates like T-notes.
“These interest rates could change every single week,” said Schod.
Reduce Risk and Maximize Gains With Annuities
Annuities are a type of insurance product that offers the dual benefit of boosting retirement savings and providing a reliable source of regular future income.
For boomers willing to assume more risk for the potential of greater payouts, variable annuities are subject to the whims of the market — but more conservative retirees have a more predictable option.
“They can also use fixed-index annuities to allow them to participate in the market without any market risk,” said Schod. “One fixed-indexed annuity allows the retiree to have their money invested in the S&P 500. If the market goes up they can make as much as 10.5%, if the market goes down, they don’t lose anything.”
Convert Pre-Tax Funds to Roth Accounts
Depending on their tax bracket, many retirees could increase their savings while reducing their obligation to the IRS by rolling pre-tax retirement funds into after-tax accounts.
“Retirees should look into converting traditional IRAs to Roth IRAs if they anticipate being in the same or higher tax bracket in the future,” said John F. Pace, CPA, a 40-year industry veteran, founder of Pace & Associates CPAs and former vice president and trust officer for what is now U.S. Trust, where he oversaw a tax group that prepared thousands of fiduciary, individual and estate tax returns. “Roth IRAs grow tax-free, and withdrawals in retirement are not taxed, helping to preserve more of their savings.”
Get Triple Tax Benefits With a Health Savings Account
Health savings accounts (HSAs) are among the most versatile and underutilized ways for retirees to save money, plan for rising healthcare expenses and lower their tax burdens.
“Take advantage of health savings accounts for those who are eligible,” said Pace, who was previously a family office executive for a Forbes 400 family, where he was responsible for the tax planning and oversight of commercial properties, family trusts and private foundations, and a former senior manager for America’s 38th largest CPA firm. “HSAs offer triple tax advantages: Contributions are tax-deductible, the savings grow tax-free and withdrawals for qualified medical expenses are also tax-free. This can help manage healthcare costs, which are often a significant expense in retirement.”
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This article originally appeared on GOBankingRates.com: 5 Top Ways Boomer Retirees Can Grow Their Savings This Year
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