As you draw closer to the end of your career, you are probably focused on reaching certain goals. You might want to save a particular amount of money, pay off debts, choose a place to retire, or some other worthwhile endeavor. But once you’ve retired, your planning will shift from those goals to more practical ones. In particular, how can you make your retirement income last for the rest of your life?
With life spans increasing and people enjoying longer retirements, this issue is more important than ever. Just before you retire, or soon afterward, take these four steps to manage your new income.
Establish a budget. For most people, their retirement income is less than what they earned during their working years. That means you need to analyze your expenses, cut out unnecessary ones, and decide upon a distribution amount from your retirement fund. It can be helpful to live on your expected budget in the months before retirement, so you can “test drive” it and make necessary adjustments.
Indulge wisely. You might have planned a major change for your life in retirement, or want to reward yourself for a job well done. There’s nothing wrong with that plan, but make sure you discuss this idea with your financial advisor preceding retirement. Any major expense such as a vacation, a new boat, or a major move should be a part of your planning process in the years leading up to retirement. That way we can help your budget to accommodate it.
Make decisions about health care. Remember that even once you reach Medicare eligibility at age 65, you can’t count on the program to cover everything you will need. You will still be subject to co-pays and deductibles, not to mention your premiums. And if you ever need long-term care, Medicare only pays for a very limited amount of nursing facility bills. Most of that burden will fall on you. Will your budget accommodate that expense? Would long-term care insurance be a smart option for you?
Continue to meet with a financial advisor. Retirement planning doesn’t stop at retirement. You will continue to reassess your goals and priorities, and will need to address new financial obstacles at times. Schedule regular appointments with us, and we will help you keep your retirement plans on the right track.
