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Updated: Apr 10, 2023

How to Make Your Retirement Savings Work for You

Learn how to maximize your Social Security benefits, create a budget for your golden years, and most importantly, save enough to afford to live the kind of lifestyle you envision for yourself.
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Loverboy got it partially right -- everybody is working for the weekend, but what about when the weekend is over?

Most Americans in this day and age are working for as long as possible now, to save for their retirement later. However, with men expected to live until about 84 years old, and women about 87, will your saving efforts now be enough for you to survive well into your retirement years?

Keeping those statistics in mind, if you plan on retiring at 65, you'll want to save up enough money to live for at least two decades.

You can use this Life Expectancy Calculator offered by the Social Security Administration, to help you better plan for retirement.

Read on to learn how to maximize your Social Security benefits, create a budget for your golden years, and most importantly, save enough to afford to live the kind of lifestyle you envision for yourself.

Factors Preventing Retirement At Age 65

Although 65 used to be the age at which people received full Social Security benefits, a decision made by the Social Security Administration in 1983 changed that. 

If you were born in 1960 or after, you will qualify for full benefits at 67.

If you start receiving benefits at:

  • Age 62, then you will get 70 percent of the monthly benefit because you will be getting benefits for an additional 60 months.
  • Age 65, then you will get 86.7 percent of the monthly benefit because you will be getting benefits for an additional 24 months.

There are several relevant questions that you might already be wondering: How much money should you aim to save? How can you make the most of your Social Security? And what are you supposed to consider when coming up with your post-retirement budget?

A good starting place to begin is by tallying your current expenses and bills, including the monthly cost of utilities, transportation, food, mortgage payments, and leisure and traveling.

On top of that, you'll want to be sure to leave some extra money to cover the costs of any unforeseen health crises. A shocking 31 percent of baby boomers say that long-term health care costs are a source of anxiety for their household, as according to a MetLife Mature Market Institute Survey.

You'll also need to factor in tax expenses, for instance, if the retirement savings pot you are contributing to requires that money to be taxed upon withdrawal. 

You are taxed based on the date you withdraw money from your retirement account -- so if you decide to take out money two years from now and you're far from retirement, you will be subject to pay taxes and fees at that time.

When you feel you've tabulated every possible cost, multiply the sum by 12 months, and then by twenty so that you come up with a realistic figure for what you'll need in retirement.

Make the Most of Social Security by Waiting

The one essential rule of thumb to abide by when attempting to maximize on your Social Security benefits is to delay tapping into them until age 70.

This is because at age 70, you can receive the highest possible monthly payout, as opposed to age 62.

If you were born between 1943 and 1954, you full retirement age is 66. 

You are technically eligible for benefits at age 62, but will be withdrawing a reduced amount.

If you start receiving benefits at:

  • Age 62, then you will get 75 percent of the monthly benefit because you will be getting benefits for an additional 48 months.
  • Age 65, then you will get 93.3 percent of the monthly benefit because you will be getting benefits for an additional 12 months.

Waiting a few years to collect can make a larger difference to your retirement funds than you may realize.

For example, someone born in 1935 who began collecting at age 62 would get 80 percent of their monthly benefit. However, if they began collecting at age 70, they would get 132 percent of their monthly benefit.

Here's an example of how delayed retirement benefits affects Social Security Benefits of someone born in 1955:

Example of benefits if born in 1955

If you start getting benefits at age: You will get:
66 + 2 months 100.0% of full retirement benefits
66 + 10 months 105.3% of full retirement benefits
67 106.7% of full retirement benefits
67 + 5 months 110.0% of full retirement benefits
68 114.7% of full retirement benefits
68 + 7 months 119.3% of full retirement benefits
68 + 10 months 121.3% of full retirement benefits
69 122.7% of full retirement benefits
69 + 5 months 126.0% of full retirement benefits
69 + 9 months 128.7% of full retirement benefits
70 or later 130.7% of full retirement benefits

To get an estimate for what your full benefits might look like, you can use this calculator on the Social Security website.

If you have a spouse, managing your household benefits should be simple. Plan to collect the lower-earning spouse's benefits early, and wait until age 70 to begin taking benefits from the higher-earning spouse.

This is a common strategy to get the most payout and will ensure that the spouse who is second to die will get the highest monthly payout they can.

Are you ready for retirement?

If you feel you're ready for retirement in the near future, or may simply be wondering how doable living on your retirement budget will be, do a six-month trial run of your budget.

Figure out living costs such as your mortgage, bills, food expenses, vacations, hobbies and so forth. If you have income from a part-time job or other source, you should also calculate this.

By doing this, you'll be able to gauge how realistic your retirement plans are, and whether you need to save up more money.

One factor that you may not have considered is the inflation, which could go up to 5 percent in the next few years, so you'll want to pad your savings appropriately.

How to Save for Retirement

There are a few financial moves you can make to ensure your retirement is more easily funded.

Secondary income

Most of the time one source of income is never enough to build a reliable retirement savings. Earning a secondary, passive income, like property-renting, can assure a monthly payment from a source that doesn't require much effort.

Start building your second source of income early on to straighten out bumps in the road and build experience.

If you find that you have more financial needs than you budgeted for, want extra cash, or simply want a productive way of filling up your time, consider seeking part-time work in your retirement.

You can also build passive income through investments, which many people use to grow their funds. Dividend stocks are an investment product you may find appealing, as they increase their dividend each year and will eventually give you a significant payout annually.

Be a safe investor

You can also guarantee income by picking safe investments such as certificate of deposits or through the purchase of an annuity, but be aware that if you've invested in stocks, this will lower your dividend payout amount.


Some savvy investors strategize their retirement entirely by buying a portfolio of investment assets, but typically, this alone will not be able to wholly support someone throughout their retirement.

Target-date funds invest in a mix of stocks and bonds. The funds mature at a specific date. As the maturity date approaches, the fund’s investments become more conservative.

TDF's maximize returns early in their lifecycle and protect principal as the maturity date approaches -- therefore retirement planning is easier and investment choices are handled for you.

Another option are index funds, which track the performance of a market index. If you have 17 years left until retirement, you can use stock market index funds to increase your chances for a higher return, although performance is not guaranteed.

Exchange-traded funds are like mutual funds that trade like stocks.You can buy or sell an ETF on a stock exchange any time the market is open. You can find an ETF for almost any investment style. With so many types of ETFs available, you can use them to cobble together a portfolio that balances risk and reward.

Pay off your debt

Another step you'll want to take prior to entering retirement, is paying off your debts in order to retire without the frustrations and financial drains of money owed.

Don't end up at 65 with debt if you can avoid it. You can save a lot of money by getting other loans paid down and credit card bills you may have racked up in your 20's paid off.

Pay down your debts as quickly as possible, so you can take that retirement vacation you've been working your whole life towards.

Consider our picks for the top IRA CDs:

Your Retirement Savings Vehicle Matters

The best vehicles for your retirement savings will most likely be a 401(k) plan and a traditional IRA or Roth IRA.

In a 401(k) plan, your employer matches a certain percentage of your 401(k) contributions (which is essentially free money), so funding that account should be your priority.

For 2020 and 2021, you can contribute up to $19,500 per year into a 401(k) plan. Additionally, you won’t typically pay tax on the money you contribute.

Additionally, the IRS allows those 50 or older to make a “catch-up” contribution to their retirement plans. For 2020 and 2021, this additional amount is $6,500.

This means you can contribute a grand total of $26,000 per year.

If you start at age 50, by the time you’re 67 you could theoretically contribute $416,500 to your 401(k). With matching contributions of just $1,500 per year from your employer, your total contributions could reach $442,000.

Aside from that, making deductible contributions to an IRA is also a wise move, and if you choose to contribute to a Roth IRA, your contributions are made from after-tax dollars, and withdrawals are income tax-free.

Traditional IRA Vs. Roth IRA

Traditional IRA Roth IRA
Contributions may be tax-deductible. Contributions are not tax-deductible.
Pay taxes upon withdrawal. Earnings can be withdrawn tax-free and without penalties if the funds were in the Roth IRA for 5 years and you've reached age 59 1/2.
You must be under age 70 1/2 to contribute. You can contribute at any age.
Required minimum distributions (RMDs) are required starting at age 70 1/2. No RMDs required.

Final Thoughts

No matter where you are in life, it's important to put money aside for the future. 

Although you may technically be eligible for Social Security benefits at a certain age, it may work out in your favor to hold off for a couple of more years to collect even more. 

In terms of savings, contribute to your retirement savings pot by matching the maximum limit you can contribute to your plan each year, in order to you make the most of the tax-advantaged unique features of your account.