Transitioning from saving your money to spending your money can be challenging.
After years of saving for your retirement years, making the change to using your retirement assets to provide a retirement income stream can be scary.
Project and adjust your expenses
A budget in retirement is just as valuable as a budget while working. A first step is to thoughtfully consider your budget as you approach retirement and even while you are retired. Don’t be afraid to spend money in retirement, yet be mindful of where you are spending money.
Plan for anticipated outlays such as food, shelter, utilities, insurance premiums, etc., as well as those outlays that might hit you unexpectedly such as certain health care costs, a new roof or a new car.
Maximize your guaranteed sources of lifetime income
Social Security could be your number one source of guaranteed lifetime income. The greater the amount of money from such sources, the less you will need to draw from your investment portfolio.
Delaying Social Security is well worth considering especially if you have longevity in your DNA. Delaying will mean forgoing benefits in the early years of retirement, but it will increase your eventual benefit for the remainder of your life.
Consider some type of work
“Retirement” is changing right before our eyes. Due to improvements in healthcare, many retirees are healthier and more active than in years past. Many retirees are not fully retired but instead continue to work in some manner while retired.
Working longer can be a win-win-win from a financial standpoint, reducing investment withdrawals and improving how long your investments last.
Although working longer is a worthwhile aspiration, it does not always work out that way. In a 2019 Employee Benefit Research Institute Survey, 80% of the workers said they would work for pay in retirement, only 28% actually did.
While workers say they expect to retire at age 65, the median age among retirees is 62. 40% of workers retired earlier than they expected. Health issues and physical demands on the job, can bring retirement earlier than expected to a worker. Therefore, it is not wise to make “working longer” your primary goal as you near retirement.
Provide a safety net
An emergency fund is still a wise tactic even during your retirement. Unexpected costs from home repair bills, auto repair bills, dental bills and the like can dampen your retirement budget if you are not prepared for such unexpected expenses.
The same goes for your healthcare coverages. Review your health insurance policy to make certain that it covers what you anticipate you will be depending upon.
Retirement income withdrawals
How much you withdraw from your retirement assets will determine your retirement plan’s success or failure. How do you know how much to take each year?
A general rule that has been around for decades, is to take 4% of your retirement assets each year while increasing that amount by the rate of inflation each year thereafter. As an example, if you have $1 million in assets, you would take out $40,000 in year one and assuming the inflation rate is 3% that year, then you would take $41,200 in year 2 and so on.
However, that is a very general guideline. Factors such as your age, your expected life expectancy, etc., factor into the equation. So does the investment returns that you receive. If your investments suffer a downturn, then you need to reevaluate your situation and withdraw accordingly.
Taxes matter
At least some of your retirement assets will be taxed as income as you withdraw them. Some will not. It behooves you to work with a professional retirement income specialist along with a qualified accountant to determine the best method of withdrawing your assets in the most tax efficient manner.
Retirement Solutions has the experience and the knowledge to help a woman navigate the chapter of her life referred to as retirement. Not only can we crunch the numbers, but we have the expertise to help you identify your values and goals as they relate to your money. Once your money is aligned with your values, your life will be experienced with greater satisfaction.
Let us know if we can be of assistance by scheduling a 15-minute no-cost, no-obligation telephone or Zoom call. There will be no pressure placed upon you to move forward if you do not wish to do so, we promise!
Simply click the “Schedule a Consultation” link in the upper right corner of this page. You talk, we listen.