Many people spend their lives saving for the future, but after so many disciplined years it can be hard to know how to manage that money once in retirement. Often, the greatest concern of seniors and retirees is that they will run out of money. It is an adjustment to go from earning a paycheck to spending your assets, but there are ways to manage your savings in retirement to avoid any issues. Here are some ways to prepare:
1. Create a Spending Plan.
It is important to establish a plan for retirement, before retiring. You do not want to run out of money, but you also do not want to miss out on enjoying your golden years. It is important to be realistic about how much you spend before retirement as you will want to be able to manage it properly in the future.
While you might think of this as budgeting, it is best to think of it as a spending plan as you will no longer have a steady paycheck to support your expenses. Itemizing your expenses into needs, wants, and aspirations can help to provide a better framework for managing your cash flow and living comfortably. Be sure to prioritize according to what is most important to you.
2. Determine a Withdrawal Strategy.
Once you have your spending plan, you will want to figure out how to withdraw from your nest egg. Create a list of guaranteed assets including Social Security, pensions, and annuities. Allocating these funds to cover necessities such as senior living, food, and utilities can provide a sense of financial security, even if you spend money on travel or non-essential items.
The amount you withdraw can also vary depending on the stage of your retirement. You may want to withdraw a larger amount early in your retirement for travel or leisure activities, and less later when you need a smaller income to support your lifestyle. You can also take it easy on the withdrawals in your early years, maybe even supplementing your income with a part-time job, then gradually increasing your withdrawals.
3. Ready for the unexpected.
When we think of what we are going to spend our retirement savings on, we tend to think more about the fun stuff rather than spending our hard-earned cash on healthcare. As medical expenses tend to increase with age, having a flexible financial strategy is a smart approach for many seniors.
While it is important to map out a spending plan and withdrawal approach, it is just as important to prepare for the unexpected. With life expectancy increasing and healthcare costs rising, planning for surprise medical expenses is also critical to a retirement plan.
4. Designate Health care funds.
Amassing an amount of money to set aside for medical expenses is a smart move. Starting with a health savings account is a great option as it features tax incentives. It is also the only account that allows you to save pre-tax dollars and then withdraw the funds tax-free. The catch is that you have to use the funds for qualified medical expenses, but most people can expect to have a decent amount of those during retirement. You also are limited in the amount you can contribute, but something is better than nothing.
Additionally, if you are enrolled in a high-deductible medical plan, you may qualify for a Health Savings Account. Funds not withdrawn for current out-of-pocket medical expenses can be carried well into retirement and withdrawn then.
5. Save for your Family.
If you plan on leaving a legacy, you also want to make sure your wealth will be used in ways that you see fit. Keep in mind that your estate consists of everything you own including cash, investments, life insurance policies, and personal property. Having a will or a living trust that is regularly updated will give you more control and make it easier for those involved to manage your legacy.
As part of this process, it is a good idea to confirm your beneficiaries as they can supersede your will. Make sure those who are noted are the ones you want to inherit your trust.
Whether or not senior living is on your radar, spending in retirement can certainly be a challenge. Here at Willamette Oaks, we are a LifeMinded residence, assisting with all of your transitions. We help you assess and adjust all of your plans as you move through life, creating greater peace of mind to help you enjoy your golden years.
Cindy Greenfield writes about Senior Health, Wellness and Life-Minded fulfillment. She facilitates and blogs for Cascade Group’s Assisted Living Community in Willamette.