You work your entire life and as a reward, you get to retire. But the reality is that your ‘work’ does not end the moment you receive your gold watch. Instead, you need to keep managing your money to make sure you can enjoy your golden years. While this might sound like a lot of effort, the reality is that it can be quite rewarding. After all, it is your money. As such, here are five expert tips on managing your money after retirement.
Plan Your Withdrawals
Why would an expert worry about their withdrawals? It’s their money and in theory, they should be able to spend it as they see fit. Well, this is correct up to a point. The reality is that the principal in your account is the very foundation for the next 20 to 30 years of your life and one of the best ways to make sure one has enough money is to make sure it remains in their account.
As such, you want to plan your withdrawals to make sure they fit a strategic purpose. In this way, you can maximize the growth of your portfolio while meeting your needs. You can accomplish this by planning, know which accounts are best positioned and what will be the tax implications of a withdrawal at a given time.
That’s right, the dreaded ‘T’ word – taxes. This can be difficult to manage by yourself, so make sure you talk to your accountant or CFP (Certified Financial Planner) – even the experts take to other experts – to see what are the potential implications of a withdrawal at any given time. This will save you money and will allow you to achieve tax efficiency.
Make Your Money Work for You
You’ve worked your entire life, now it is time to make your money work for you. This is an important point as not all of us can retire with $10 million in our accounts. Instead, you need to find those investments which provide income opportunities with minimal risk – this way you won’t lose your entire nest egg.
Now income opportunity does not focus on growth alone. Granted it is nice to get a good return, but you also want to consider the fixed income from your investments. This could be in the form of dividend payments or a regular annuity which will help you cover the costs of being retired.
This is important. A recent research paper noted that retirees who don’t need to worry about their income are more likely to lead happier and more fulfilling lives. So, find ways to make your money work for you, this way you can enjoy your retirement.
Identify What is Most Important for You
People are living longer, more active lives and someone who retires today might reasonably expect to live well into their 80’s or longer. As such, you need to know how to make trade-offs in your retirement planning. This means knowing how to identify what is most important for you.
For example, you might not want to take that year-long cruise if it cuts 10 years out of your retirement savings plan. Now, this doesn’t mean you need to make sacrifices either. Instead, learn how to prioritize or how to find new sources of capital.
In fact, many people are turning to reverse mortgages to augment their retirement savings. This make sense as for many people their home is their move valuable asset. Just remember if you are considering this option, then search out lenders who are HUD approved.
Hold Off on Start Social Security
While the program is not perfect, it has helped hundreds of millions of retirees by providing a guaranteed income source. There is one simple trick that the experts use when preparing for Social Security.
That is delaying payments until they are 70 as doing so can increase the monthly payment by more than 30%. The move also increases the survivor’s benefits – a big plus for your significant other.
Plan for Health Expenses
It costs money to get old. According to Fidelity, the average 65-year-old couple will spend more than $260,000 on healthcare while they are retirement. By the way, costs are only going in one direction – up.
As such, you need to have a plane which covers health expenses like insurance premiums, prescription drugs, co-payments, and deductibles. This might sound like a lot, but you will want to look at supplemental and long-term care insurance as ways to offset costs.
In addition, set up a separate account with enough cash to cover one- to two-years of out-of-pocket expenses; this way you and your spouse will be able to withstand the high cost of healthcare.