Retiring can be a joyful experience – but for many people, money woes cloud the sense of celebration.
Researchers today fear an oncoming “retirement crisis.” As many people in the U.S. haven’t saved enough for retirement, the concern is that they may all run out of money at once. More than 60 percent of Baby Boomers are worried about running out of money in their retirement, so the concerns also affect people who are already retired.
However, you don’t have to face this worry if you know how to manage your money in retirement. We’ve got the tips you need to stay financially stable through all the years to come. Keep reading for the money management tips that will let you take control of your retirement finances!
1. Save Taxes on Your Withdrawals
Once you’re retired, every little bit you can save helps. Tax savings should be an important part of your money management strategy in retirement.
Your different retirement accounts probably have different tax rules. Strategize for how you’ll withdraw your money from each account for the most tax savings. For example, you should prioritize your withdrawals according to your required minimum distributions, which will start when you reach age 70 1/2.
Think about doing a Roth conversion to help spread out your tax amounts and how often you need to pay taxes. And make sure to keep track of the amounts you withdraw from your different accounts every year, and how those amounts will affect your tax bracket.
Taxes are complex, so these decisions need to be made on an individual basis. When it comes to tax efficiency, it’s worthwhile to hire a great financial advisor to help you make the right decisions for your retirement.
Hire an advisor who has experience with both income taxes and money-saving strategies for retirees for the best results. Retirement strategies are different from standard money-saving techniques, so make sure your advisor knows the difference.
2. Consider Retirement Income
You may have retired from your job, but your income doesn’t have to stop there.
As you saved for retirement, you probably focused on setting aside as much money as possible and maximizing the returns on your different investments. But when you retire, it’s a good time to stop focusing so much on your returns, and start thinking about how those assets can become stable retirement income for you to rely on.
When you have a guaranteed income to rely on for your retirement, you’ll feel much happier, more stable, and less stressed than if you need to make random withdrawals from your retirement accounts. For example, you can use annuities to use your retirement savings as an income stream.
3. Decide on Your Priorities
When you retire, you’ll still need to use a budget. You should enjoy your time, but be sure to consider how you’ll prioritize your spending, too.
For example, if you want to take a dream vacation, you might need to cut back on your shopping for a while. When you focus your spending on the things that really matter to you, you won’t spend as much in general, and you’ll be happier with the things you do buy.
One thing you should definitely prioritize is spending on yourself. When you retire, it’s tempting to feel obligated to help out other members of your family, especially those who are younger. But if you don’t focus on taking care of yourself and your finances, spending on them won’t actually be helpful.
When you’re retired, you won’t be pulling in money – at least, not as much as before. You’ll need to live with the money you have, which might mean prioritizing things differently. Making a budget that you’ll be happy with is well worth it to help keep your finances organized.
4. Check Out Home Equity
Home equity is a great way to boost your retirement income if you own your own home.
For most homeowners, home equity is the biggest source of wealth you have. You can use that source to help pay for your retirement in a number of ways. For example, you might downsize in order to make the most of the money in your home. If you’re living somewhere expensive, or in a home that’s bigger than what you really need now, downsizing can actually take a lot of stress off your shoulders.
However, if you really want to stay where you are, you can consider getting a reverse mortgage instead of downsizing. This helps you get rid of your ongoing mortgage payments, and keep your home while also borrowing some of the equity.
5. Wait for Social Security
The longer you can wait to start collecting Social Security, the better. In fact, if you wait from just age 62 to age 67 to start collecting, you can save hundreds of thousands of dollars.
Social Security is a guaranteed monthly income that lasts as long as you live. But the longer you wait to start it, the higher the monthly amount will be. This means that if you can just hold off for a few years, you’ll be able to enjoy a higher quality of living as you age.
Check an online Social Security calendar to figure out how much you can save depending on when you start. Strategizing with this income helps you make the most of it.
6. Know That Your Spending Will Change
When you retire, your spending doesn’t stay the same for the rest of your life. When you first retire, you might be more active and spend even more than you were while you were working. Later on, you might slow down and stay home more often, but new medical expenses can also change the way you spend. Plan ahead by knowing that your spending will change through the years.
Ready to Try These Money Management Tips?
It’s always good to use money management tips throughout your life, but it’s especially important once you retire. These tips will help ensure that you enjoy every year of your retirement.
Looking for a more advanced guide to how much money you need for retirement? Check out this recent post!