Living Well in Retirement
Much time is spent in planning for retirement, yet people sometimes give less attention to how to manage their money once they are actually in retirement.
Planning for a secure, comfortable retirement doesn’t end at the accumulation stage. You want to ensure you don’t outlive the assets you’ve carefully accumulated over the years. To fully enjoy your retirement—and do all the things you want to do—you need to ensure your money will last. Here are some strategies that can help you make the most of what you have to live on:
- Create a monthly retirement budget
If you have planned for retirement, then you know your retirement income needs (typically about 80 percent of your preretirement income). But once you’re retired, things can change. For example, if you move to a less expensive area, downsize to a smaller home, or pay off your mortgage while you’re retired, you may be able to stretch your money a bit farther. On the other hand, health insurance costs may increase due to your age along with household expenses due to spending more time at home. Knowing your actual monthly expenses can help you to create a budget—and live within your means.
- Reduce your spending
More time on your hands can easily lead to more money being spent. In retirement, it’s particularly important to not only create a budget, but stick to it—and reduce your spending where possible.
- Move to a new place
Retirement is a good time to evaluate your current housing situation. Obviously, there are a lot of factors that go into where you live, so if moving to a new (and less expensive) location is not an option, you may want to consider whether downsizing would work for you. Smaller homes, including condominiums, require less maintenance—which can improve your quality of life as well as your budget.
- Get a job
While some people may work during their retirement because of financial need, you may want to consider working for other reasons as well:
- Retirement is actually a good time to do something you’ve always wanted to do. Enjoy writing? Become a contributor to a local newspaper. Enjoy shopping? Find employment in a retail clothing store and you’ll usually enjoy a nice discount.
- Working can have positive social and psychological benefits by introducing you to new people in your community and keeping you active.
- Health insurance can be less expensive, and not all employers require that you work full-time to be eligible for coverage.
- Give a charitable gift
Charitable giving enables you to distribute a portion of your assets to selected organizations, thus reducing the amount of taxes you owe.
There are steps you can take to make the most of the distributions you take during retirement:
- Take advantage of tax deferral as long as possible
Generally speaking, the government doesn’t require you to begin taking distributions from qualified plans until age 70½. If you can start by drawing from other assets first, your retirement funds can continue to accumulate on a tax-deferred basis.
- Consider a “combination” annuity strategy
If you have money in CDs, regular savings accounts, or municipal bonds, purchasing a combination of a single premium deferred annuity (SPDA) and single premium immediate annuity (SPIA) could increase your retirement income and preserve your remaining assets.
- Consider an immediate annuity
An immediate annuity can provide a guaranteed lifetime income stream regardless of how long you live, and there is no risk from market or interest rate fluctuations so your payment will not change.
Since there is not a single planning strategy that is appropriate for everyone, it is important to analyze your particular needs and goals before making any decisions.
A Financial Professional can help you determine which strategies and solutions can best help you meet your retirement needs.
Or, read about the benefits of charitable giving and wealth transfer.
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