Even for the most seasoned personal finance experts, retirement can present a unique set of challenges. Thats because, for many people, retirement is a brand-new chapter in their financial lives. Before, you likely focused on saving up as much as you can, putting money toward an aggressive investment portfolio, or thinking about large purchases like a home, car, or your kids college tuition.
In retirement, on the other hand, things can be pretty different. Savings is less of a priority, as now youre living the period of your life youve always been saving for. Your kids are likely adults and mostly pay for their own things (hey, theres nothing wrong with staying on the family phone plan its a great savings). And you may already own a home and trusty car.
But that doesnt mean that large expenses are totally out of the picture. During retirement, youll likely still have to pay for rent or your mortgage, maybe car payments, and likely some medical procedures and regular check-ups. That means your budget needs a serious overhaul. In this article, were highlighting 5 ways that retirees can update their personal finances to reflect the reality of a post-career life. Read on to find out where its a good idea to reassess.
Table of Contents
Regularly assess your retirement savings
Your retirement savings is the money youve been putting away your whole life. Its the treasure trove youve built to keep yourself happy, comfortable, and having fun during your golden years. While you likely spent the majority of your life putting money into these accounts, its now time to start withdrawing.
And that means keeping a careful eye on that sum. Many experts suggest having as much as a cool million in retirement savings before leaving your job. Thats not a reality for most people, so its likely youll have to work with the savings you do have.
- Bonus tip: Not sure how much money you should have in your account right now? Check out this article on asset allocation by age for an in-depth look.
The last thing you want is to run out of money when you seriously need it. So, in order to maintain a healthy financial profile, be sure to make a detailed plan for how much of your savings youll withdraw at a time. That brings us to our next topic.
Make a detailed spending plan
Your spending plan should carefully detail how much money youll have going out (and coming in) each month, and exactly where that money will go. For instance, if you plan on eating and drinking out a lot, its a good idea to make a budget that says how often you can afford to do that.
Other items on your spending plan should include:
- Rent or mortgage payments
- Food and groceries
- Regular medical costs
- Fun and hobbies
- Eating out
- Gifts and incidentals
By keeping an eye on your savings and your spending plan, youll have a better idea how much you still have to work with at the end of each month. You can also start a side job to earn a little money on the side while youre retired.
Maintain a healthy emergency savings
Everyone needs an emergency savings, including retirees. The last thing you want is to bottom-out your retirement fund covering the cost of a sudden emergency. Its a good idea to have a few thousand at least stored away in case of a medical disaster, home damage, car wreck, or other unforeseen catastrophe.
Seek out all sources of income
Be sure that you know your full benefits and use them to advantage. Does your work have a pension? Have you collected from all of your retirement accounts that you may have had at various points during your career? Are you eligible for Social Security or Disability Insurance benefits? Its important to review each of these to ensure youre getting the full amount of money youre owed.
Consider your estate
Lastly, its not fun to think about, but its an essential part of everyones life: considering where they would like their belongings and assets to go once theyve passed on. Drawing up a will and testament is critical to ensuring that the people who you want to take care of after youve gone have what you wish to give to them. Putting this off can only make things more difficult, so the sooner you dedicate time to this, the better off everyone will be.
Retirement finances can seem intimidating, but with a careful plan and plenty of foresight, it can be accomplished and you can enjoy the fruits of your labor!