Even for the most seasoned personal finance experts, retirement can present a unique set of challenges. That’s 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 you’re living the period of your life you’ve always been saving for. Your kids are likely adults and mostly pay for their own things (hey, there’s nothing wrong with staying on the family phone plan – it’s a great savings). And you may already own a home and trusty car.
But that doesn’t mean that large expenses are totally out of the picture. During retirement, you’ll 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, we’re 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 it’s a good idea to reassess.
Regularly assess your retirement savings
Your retirement savings is the money you’ve been putting away your whole life. It’s the treasure trove you’ve 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, it’s 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. That’s not a reality for most people, so it’s likely you’ll 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 you’ll 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 you’ll 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, it’s 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, you’ll 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 you’re 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. It’s 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? It’s important to review each of these to ensure you’re getting the full amount of money you’re owed.
Consider your estate
Lastly, it’s not fun to think about, but it’s an essential part of everyone’s life: considering where they would like their belongings and assets to go once they’ve passed on. Drawing up a will and testament is critical to ensuring that the people who you want to take care of after you’ve 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!