5 Tips For Managing Your Money After You Retire

5 Tips for Managing Your Money After You Retire

Financial planning for retirees is just as important as it is for working people. These five tips can help you make the most of your golden years, whether you plan to travel the world or rest at home with your loved ones.

1. Understanding Retirement Income Planning

For many retirees, Social Security benefits are the primary source of income after they stop working. You can begin collecting these benefits as soon as you turn 62, though waiting to collect increases the amount you can get.

That said, your benefits max out at age 70, after which there’s little point in waiting to collect. It’s important to consider how much you need the money now, and whether your spouse will depend on your benefits.

You should also consider any other sources of income you have, such as:

  • Pension: In a traditional pension, your employer gives you a guaranteed income each month for the rest of your life after retirement. Many employers are phasing out this arrangement in favor of defined contribution retirement accounts like 401(k)s or IRAs.
  • Retirement accounts: Defined contribution (DC) savings accounts, like an individual retirement arrangement (IRA), allow you to contribute a percentage of your income to a tax-advantaged savings account.
  • Investments: Most retirees adjust their investment portfolios to focus more on maintaining their existing wealth and gaining income from it.
  • Work: Many people continue working into retirement. That said, it’s important to remember working between age 62 to 70 will impact your Social Security and Medicare benefits.

A diversified investment portfolio combined with a strong savings plan can help you maximize your Social Security benefits regardless of whether you continue to work.

2. Financial Strategies for a Secure Retirement

Most accounts are included in an employer’s benefits plan. However, there are options for workers who are self-employed. Some of the most common retirement plans include:

  • 401(k): The most common direct contribution account, an employer-sponsored 401(k) works by taking your contributions and putting them into investment funds like stocks and bonds. If you are an independent contractor or entrepreneur, a solo 401(k) may be a suitable alternative.
  • 403(b): Teachers, nurses, and other eligible employees of tax-exempt organizations can set up a 403(b) savings account, which is similar to a 401(k). However, investment options are typically more limited with a 403(b).
  • 457(b): Certain government employees are eligible for a 457(b) retirement plan, which offers flexible withdrawal rules and additional contribution options.
  • IRA: You might make contributions on your own through your financial institution, or your employer might make contributions through payroll deductions.

In a traditional retirement savings account, your contributions are tax-deductible — but when you begin withdrawing funds, you’ll have to pay the taxes previously withheld. Waiting to withdraw and creating a withdrawal is usually the best plan of action here.

Many employers also allow you to set up a Roth configuration of any of these accounts. A Roth savings account allows you to pay your contributions after tax, which means your future withdrawals are tax-free.

3. Navigating the World of Annuities

An annuity is essentially a type of income insurance that provides a guaranteed income until the end of the policy. You have a lot of different options to consider when buying an annuity, and the choices you make will impact your overall portfolio.

Types of Annuities and Choosing the Right One

Annuities come in two different forms:

  • Fixed: You receive a fixed amount of money on a regular schedule.
  • Variable: Your payment amounts vary depending on how well the investments you make into the fund do.

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Although variable annuities are less stable, they offer greater control over your future gains. They also allow you to add extra features and rides, which can create a hybrid between the two.

There are also two types of annuity payment schedules you can choose from:

  • Immediate: The policy begins paying out immediately after you make a lump-sum payment. This arrangement is advantageous if you need a steady income right away.
  • Deferred: Your policy will kick in at a future date — typically whatever age you specify in your agreement. The advantage here is that deferring payments allows the money in the account to grow, which means bigger payouts in the future.

Integrating an annuity into a comprehensive retirement plan may seem intimidating, but it’s a much simpler process than it looks.

4. Budgeting for a Post-Retirement Lifestyle

Spending money in retirement doesn’t have to be stressful. Setting a budget for retirement can help you enjoy your time without spending too much of your savings.

Creating a Realistic Retirement Budget Without Sacrificing Quality of Life

To create your budget, list all your current monthly expenses, including:

  • Mortgage or rent
  • Utilities
  • Health insurance premiums
  • Prescription medications
  • Gym memberships
  • Car payments
  • Groceries
  • Personal maintenance
  • Leisure activities
  • Pet supplies

For any payments you make less frequently, such as once or twice a year, divide the total annual cost by 12 to find the average monthly expense. Then, review your typical spending habits and adjust as necessary to reflect what you’ll need after retirement.

Once you have your current budget drawn up, you can find ways to save while adding value to your quality of life. Making smart investments into your home, like installing a home elevator or dumbwaiter, is a great way to ensure your quality of life stays high well into retirement — especially if you plan to age in place.

In addition to making your home easier to navigate as your body ages, an elevator can raise your home’s value. If you would need to move into an assisted living facility, for example, you could make a little extra when you go to sell your home.

5. Planning for Medical Expenses and Long-Term Care

It’s important to remember that Medicare coverage isn’t universal. The services you’ll have to pay for out of pocket depend on where you live, your age, your income and any supplemental policies you have.

In fact, the average retiree spends most of their Social Security benefits on medical expenses simply because they don’t have another source of funds. Planning early can help you get the most out of your benefits without interfering with your ability to pay for care.

Anticipating and Planning for Healthcare Expenses

A health savings account (HSA) is a tax-advantaged account you can contribute to until you turn 65. HSA withdrawals for eligible medical expenses are tax-free.

Long-term care, such as at-home care or moving to an assisted living facility, is another major out-of-pocket cost to consider. A long-term care insurance policy can help you get the care you need without dipping into your Social Security benefits or retirement savings accounts.

Setting up a liquid emergency fund is especially useful for sudden medical expenses, such as repairing or replacing broken eyeglasses. These funds should be easily accessible so you can avoid having to dip into your retirement savings.

Invest in Your Retirement With Inclinator

Invest in Your Retirement With Inclinator

Want to learn more about how installing a home elevator or dumbwaiter can add value to your retirement? Contact us today to set up an onsite consultation with one of our expert sales reps. In addition to helping you design the best system for your home, we’ll provide expert guidance on planning for an autonomous, comfortable retirement lifestyle.

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