August 4, 2020

Edited 08/04/20

I Have More Disposable Income in Retirement Than I Did When I Was Working

Learn how one woman started saving late but managed to increase her disposable income in retirement.

If you rely on headlines touting statistics about the number of Americans who don’t have enough saved for retirement, it’s easy to get discouraged about your ability to fund a comfortable lifestyle when you leave your job behind. But it is possible…even if you didn’t start saving when you were 22 and if you’re saving just a few dollars from every paycheck.

In fact, one of our users managed to save enough where she has more disposable income in retirement now than she did while working. Here’s how she did it.

Vanessa K.

Age: 60

Former Occupation: Budget manager

Location: New York

Vanessa’s Story:

Vanessa and her husband retired at ages 58 and 62, respectively, when they were both eligible to begin collecting their pensions. They’re debt-free except a conventional mortgage with an interest rate of 3.85%, and they have combined retirement savings in the mid-six figures. But they haven’t touched their savings yet. Instead, they’re living off their pensions and her husband’s social security benefits —she’s too young to collect social security yet.

They use her husband’s social security checks to pay their income taxes, so they can collect their pensions with no withholdings. Since they’re no longer paying for commuting expenses, professional wardrobes, dry cleaning, and all the little things you tend to spend money on when you’re going to the office every day, they have more disposable income now than they did when they were working.

So how did she do it?

How She Did It:

Vanessa started saving for retirement 20 years before she retired. “Before that, I worked for 25 years in [the private sector], and all I had to show for it was 25 years,” she said. When Vanessa began her career as a budget manager for the largest municipal trade union in the country, she consistently contributed three to six percent of her salary to her pension. 

And she began contributing to her 401(k). At first, she was only setting aside $10 a week, but every time she got a raise, she increased her contribution. By the time she retired, she was saving about 35% of her gross income and putting $400-$450 a week in her 401(k).

Vanessa also took advantage of tax-deferred transportation and flex spending accounts to pay for commuting and health care expenses, which reduced her taxable income. 

She saved big by shopping at Costco and high-end thrift shops where she could get clothes at a fraction of what it would cost her at a department store.

What She Says:

At one point, Vanessa had $14,000 of credit card debt. “I was spending $500 [a month] just paying the minimum interest charges,” she said. So, she borrowed money from her 401(k) to pay off her credit card debt. She repaid the loan from her 401(k) in two years and said good-bye to credit card debt forever. Vanessa cautions people to use credit cards wisely and pay for purchases as you go to prevent debt from accumulating.

She also recommends living below your means. “Stop trying to show off. Once you stop wasting money, you’ll be surprised how quickly it adds up,” she said. Vanessa practiced what she preached, bringing her own lunch, water bottle and orange juice to the office when she was still working.
She encourages everyone to start saving as soon as they can. “If you can get into a 401(k), do it. If not, at least put something in an IRA,” she advises.

Her Plans for the Future

Vanessa and her husband had a trip to Jamaica planned for last March, but they had to cancel it because of COVID-19. She hopes to be able to go next March, but only if it’s safe. She’s spent too much time working and saving for retirement to gamble with her health now. She needs to stay healthy, so she can keep up with her grandchildren. She plans to spend much of her free time spoiling them for years to come.

How You Can Save More 

If you’re worried you’re not on track to achieve your retirement savings goals, don’t get discouraged. Whether you haven’t started saving yet or you’re not saving enough, there are things you can do today to help you boost your savings. 

First, if you haven’t started saving yet, now’s the time to start, even if you only have a few dollars to contribute like Vanessa did. Small amounts add up, and you can increase your contributions over time. 

Second, reduce non-essential spending, and if you’re not living below your means, it may be time to make some lifestyle changes to help preserve your financial future.

Third, you may also consider taking on a part-time job or side gig to earn extra money exclusively for retirement. By adding part-time income when you retire, this can increase your retirement savings fund while also keeping you busy.

 See how your Silvur Retirement Score can change when you add part-time income, find your Retirement Score now. Silvur will help you stay on track of your financial retirement goals and provide you with a checklist on how you can continue to save and become prepared for retirement.