Retirement is your time to live life to its fullest-- with one caveat: you’ve got to be smart about how you manage your money. Your income stream has changed now that you’re tapping into a retirement fund to cover living expenses so smart retirement planning is a must. Taking a few minutes to plan out your retirement can help ensure you can take that trip you’ve always wanted while still being able to afford a comfortable lifestyle. Read on for our top 6 financial tips that can help you better prepare for your retirement.

Summary

1. Right-Size Your Housing
2. Have a Spending Plan
3. Engage in Tax Planning
4. Remember to Account for Inflation
5. Stay Healthy and Active
6. Work Longer

1.  Right-Size Your Housing

Housing is the top expense for the majority of people still fit and healthy. Minimizing this expense by “right-sizing” is a fast way to cut back on costs and ensure you have funds to enjoy your retirement. Just remember, right-sizing housing means different things to different people. For some, it could mean selling existing real estate and moving into a smaller home or condo. For others, it may mean staying put and renting rooms. Others may even choose to move in with family members to share housing costs. Before you retire, decide what right-sizing looks like for you and remember, even if you ultimately find yourself in a smaller space, there are benefits to not paying for rooms that you no longer need.

2. Have a Spending Plan

Budgeting isn’t everyone’s idea of fun, but it’s important to understand where every penny you spend ultimately goes, particularly as you head into retirement. Take the time, BEFORE you retire, to create a “scenario” retirement budget that outlines what you think you will be spending AFTER you retire. Be sure your plan covers not only your essential expenses but also some fun stuff, like travel, shopping, or learning a new retirement hobby so you can enjoy your “Golden Years”.

Once you have established this retirement spending plan, put it to work. Not only can this plan act as a guide during your retirement, but it can be used prior to retirement to help you figure out how much you’ll need to set aside to ensure you can generate your desired income. And remember, whatever income you generate during retirement is often still subject to taxes.

3. Tax Planning

Taxes don’t end when you’re retired, and while tax laws vary from state to state, how and when you choose to pull funds from a retirement account could cost thousands in taxes. To help make the most out of your retirement budget planning, a good financial tip is to work with a trusted expert to find ways to maximize your retirement benefits without experiencing any unnecessary tax burden.

4. Remember Inflation

When you are financially planning for retirement, creating your retirement budget, or even tax planning for the future, it is important to remember the role inflation can play on your finances. Inflation is the elephant in the room for many retirees because while your income may be fixed, inflation isn’t. With people living longer, healthier lives, it is important to budget for inflation wisely and make sure it is considered. When you save for retirement, account for cost-of-living increases to ensure you don’t run out of money in retirement and be sure to adjust your current savings and income to account for inflation changes accordingly.

5. Be Healthy and Active

While staying active may not seem like a financial tip, the truth is, in addition to housing, medical expenses can take a significant chunk from your retirement budget, and you may not necessarily have always thought to plan for them. Illness and chronic conditions are expensive so choosing to manage your lifestyle up to and through your retirement will not only improve your quality of life as you age but could reduce overall health care costs. Making healthy eating choices, minimizing stress, and picking up other healthy habits like learning to play pickleball, can help you stay active and keep medical care to a minimum.

6. Work Longer

According to one source, waiting one extra year to retire can boost the standard of living during retirement for years to come. Think about it: that’s an extra twelve months spent growing your retirement assets, saving money, and increasing retirement income. Social Security payouts could increase by eight percent alone if you wait one year to claim benefits.

Even if you retire from your current role, consider other ways to bring income. Find part-time work, be a consultant, or join the gig economy using your passions. While no one may want to work forever, the benefits of putting in a little more extra time can really impact the quality of life you have as you age.

Be Money Smart in Retirement 

It’s not uncommon for people to worry about running out of money in retirement. We don’t know how long we’ll live or how much expenses will increase. What we can do is save, budget well, make smart financial choices, and work with trusted advisors. At Del Webb, we are here to help you with any of your retirement budgeting questions and are committed to helping you live your best retirement life.

Contributed to The 55+ Society by Casey McKenna-Monroe

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Published 12.1.20