What Are Some Different Ways Baby Boomers Can Save Money?

Baby boomers are either entering retirement or very close to it. At this stage in life, evaluating your savings and expenses is critical to ensure you’ll have enough to live on in retirement. If you’re worried about preparing for your golden years, you’re probably looking for ways to build up more savings and reduce your spending so that you don’t run out of money. This article will dive into a few ways baby boomers can save money to enjoy this stage of their lives fully.

1. Use extra retirement plan benefits

Retirement plans can offer extra benefits later in life. For example, once you reach 55, many plans let you make “catch-up” contributions by increasing the yearly contribution limit. This allows you to save more money from taxes while building retirement funds as you approach retirement.

2. Pay off debt

As you approach retirement, eliminating as much debt as possible is vital. This can help you save more in your final few working years and let you cut your expenses once you leave the workforce. First, start with high-interest debt, like credit cards. Then, move on to personal loans and other discretionary debts.

Mortgage and auto loans may be worth leaving alone for now since they’re larger and tend to have low interest rates. It’s up to you to determine if they’re worth paying off or if it’s better to invest that extra cash elsewhere.

3. Get a life insurance policy with cash value

According to LIMRA’s 2022 Insurance Barometer Study, 30% of baby boomers currently have a need for life insurance. All life insurance policies offer loved ones financial protection, but permanent life insurance also comes with a cash value growth component for wealth-building. Part of each premium goes into this growth component, which grows tax-deferred at a specific rate. You can then withdraw or borrow against this cash value when it’s large enough. You can also get the full value minus surrender charges if you surrender the policy.

Here are a few types of life insurance with cash value:

Final expense insurance

Final expense insurance is a small whole life insurance policy designed to help pay for end-of-life costs like funeral expenses and medical bills. Death benefits are small, but premiums are inexpensive. Cash value works like whole life insurance, with a low but guaranteed rate.

Whole life insurance

Whole life insurance offers substantial lifelong coverage with fixed premiums and death benefits. In addition, whole life cash value grows at a fixed interest rate. That may mean growth is smaller than other policies, but it’s guaranteed. So, policyholders don’t have to worry about market fluctuations.

Universal life insurance

Universal life insurance provides a similar level of lifelong coverage as whole life insurance, but policy premiums and death benefits are adjustable. Policyholders can increase the death benefit by paying more in premiums and potentially getting another medical exam. Conversely, you can also reduce the death benefit to reduce your premiums.

As for the cash value, it grows based on current interest rates. Additionally, you may be able to pay premiums with your cash value when it grows enough.

4. Sell unused items

Many people accumulate items they don’t need or use over their lives. Decluttering these items from your home can reduce your stress and help you save some extra cash.

These days, you can sell items online via marketplaces like Craigslist, eBay, and Facebook Marketplace, but you’re responsible for pricing and shipping items. Specialized websites for certain items, such as electronics or old clothes, offer more convenience. They handle shipping but also appraise your item and determine the price. You can also hold a garage sale if you prefer.

5. Downsize

Once the kids are out of the house, you might be able to get a smaller home to save money. Selling your existing home could potentially allow you to pay off the remainder of your mortgage and buy your new house all cash — eliminating your mortgage payment without giving up the space you need.

Similarly, you might be able to get by with just one vehicle. Selling the other, paying off your auto loan, and banking the difference can help save more money.

The bottom line

As you get close to retirement, it never hurts to save more money. Start by maximizing your retirement plan benefits and paying off as much debt as possible. Next, consider a cash value life insurance policy to protect loved ones and access another wealth-building vehicle. Then, sell unused items and consider downsizing to bank more cash, reduce debt, and cut expenses. Following these tips can help you put aside more money and enjoy your golden years with financial peace of mind.