Your best problem in retirement? Lots of money saved, here’s how to do it

It’s a good problem to have: saving a lot of money for retirement and having extra money to leave to your heirs. Here’s a look at the types of people who save a lot in their lives and how you can be one of them.

Who saves more?

A study by the National Bureau of Economic Research reveals the types of people who work and save the most.

According to the study, married men work in the workforce and save “significantly” throughout their lives. Married women’s time in the labor market peaks in middle age.

Single men show lower employment in the labor market and lower savings after the age of 40 compared to married men. Single women work less than single men and accumulate less wealth.

Both single men and women with no marriage prospects increase their labor force participation and increase their savings from an early age.

The study also found that couples have more than twice the wealth of singles at all ages, and that a person’s wealth declines only modestly after retirement.

A slight decline in wealth after retirement

The study reveals that people spend only a modest amount of their wealth after retirement, which differs from the life cycle model. The desire to save is one reason why people withdraw their wealth less after retirement. The study found that saving to cover medical expenses, and saving money to bequeath upon death, in particular, are two main motivations for saving among those surveyed.

Another factor to consider when looking at modest spending in retirement is the life expectancy of the wealthy. They live longer and retain more wealth as they age.

How to save more than you need for retirement

If you’re interested in leaving money to heirs or just want to have an extra amount of money in retirement, consider these tips to save more for your later years.

• Start saving early. “Not only are they valuable for establishing a habit, but the small amounts grow astronomically with interest compounding over the decades,” said Samantha Mockford, a certified financial planner at Citrine Capital.
• But starting later is fine. “If you feel like it’s too late to have time on your side, think again,” Mockford said. “Do what you can in your current season of life.”
• Be aggressive. Don’t be afraid to invest in riskier assets, such as stocks, if you are 10 or more years away from retirement. “This means the account value highs will be higher, the lows will be lower, but the overall upward trend will be steeper over time,” Mockford says. “As you approach retirement, invest your retirement savings more conservatively.”
• Automate retirement savings. Have money from your paycheck go directly into a Roth IRA or traditional IRA. “Make a budget and set your salary deferral to a percentage that is challenging but realistic,” Mockford said.
• Maximize tax-advantaged accounts. “Increase your contributions to your 401(k) or 403(b), invest more money in your Roth IRA, contribute to an HSA if possible, and open 529s for your children. The earlier you do this in life, the better,” said Tom Arasz, principal financial advisor at Bmore Financially Fit.
• Work with a financial planner. If you’re not confident in choosing investments on your own, seek the help of a fiduciary financial planner to guide you toward a successful retirement.

How to spend retirement savings responsibly

Once you reach retirement with more than you think you’ll need, here’s how to manage your massive nest egg.

• Make conservative choices regarding your investments. “Invest more conservatively while drawing down your accounts — that means a higher bond-to-stock ratio in your diversified portfolio,” says Mockford.
• Create a new budget. Rethink your spending now that you’re retired. “Create a spending plan based on your values ​​that includes your regular expenses — like food and clothing — but also irregular expenses — like travel, replacing your car every certain number of years, hobbies, spoiling the grandkids, etc.,” says Mockford. “Adjust this number for inflation each year.”
• Donate to charity from your IRA. “If you make regular donations to a registered nonprofit, consider making the same donations directly from your IRA. These ‘qualified charitable distributions’ count toward the required minimum annual distribution, and that’s better for you and the charity,” says Mockford.
• Work is fun. “Many people find it fun and freeing to supplement their retirement income with some income earned from a fun, low-stress job,” Mockford said. “Or if they calculate their retirement savings are sufficient, but want to work for fun and delay the start of distributions.”

Bottom line

Saving and investing today so that you have enough in your retirement savings is a smart investment strategy. Invest early to take advantage of compound interest and make the most of tax-advantaged accounts — such as 401(k) and individual retirement accounts. If you need help, seek out a fiduciary financial planner for advice on choosing investments and developing a financial plan.