Apr 4, 2025
Before you retire, you want to make sure you have plenty of income to cover your spending needs. But, you may want to retire with more than the minimum amount necessary to fund your lifestyle. In fact, many people hope to leave work with more than the ability to cover the bare essentials.
If you are a few years out from retirement, paying off debt, saving for unexpected healthcare costs, and are on track to have an extra $2,700 a month after covering the basics, that's a pretty good financial position to be in. That $2,700 in extra money would provide you with an additional $32,400 annually to enjoy after paying the bills. This is more than half of the entire $54,710 median household income for households of those 65 and over, as reported in September 2024 by the U.S. Census.
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So, what should you do with this "extra" money if you're lucky enough to have it? Here are a few possible options to consider.
Donate to charities
Charitable giving is a top priority for many seniors, with 78% of pre-retirees and retirees between the ages of 50 and 80 indicating to Fidelity that they are committed to donating and expect it to play a significant role in their retirement.
Giving some of your extra money to causes that you care about can allow you to make a real difference in your later years. A financial advisor can also help you explore tax-efficient strategies for giving, as 21% of retirees aren't aware of any tax-advantaged methods of donating.
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Invest it on behalf of your kids or grandkids
Investing for your kids or grandkids is another great way to park that extra retirement money, as you can play an active role in helping the next generation get a head start on financial security.
College costs are seeing significant increases. A four-year degree in the 2035-2036 academic year could run as high as $230,176 for a four-year period. If you want to spare your grandkids the burden of substantial student loans, you could look into funneling some of your extra money into a 529 plan.
You could also help out your kids during their expensive child-bearing years when they may struggle to buy a house or pay for daycare costs, which average $827 per week for a nanny and $343 per week for a center, according to Care.com.
Diversify your investments
If you aren't yet retired and have plenty of money in a 401(k) or IRA, you may want to consider putting some funds into a taxable brokerage account.
Since you can't access your tax-advantaged retirement funds without penalty until you are 59½, diversifying into an investment account you can withdraw from whenever you like may be the ticket to early retirement.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Enhance your lifestyle
Typically, common financial wisdom dictates that you shouldn’t succumb to lifestyle inflation (where your spending increases alongside your income). But, while this is prudent advice throughout much of your working years, if you now find yourself in a position to reap the benefits of smart financial moves or simple good luck, you could also use your extra funds to enjoy your life. You can begin by asking yourself what would personally bring you joy? You may decide you want to travel more, spend more time on your hobbies as you aren’t forced to work into your later years or you can let yourself enjoy dining out at nicer restaurants.
Just be sure you don't go overboard, that you maintain a safe withdrawal rate, and maintain an emergency fund for any incidentals or unforeseen health expenses, even if you feel flush with cash for now.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
