Money Management in Retirement is Just as Important as Planning for Retirement
More often than not, the advice surrounding retirement planning stays focused on saving for retirement – and for good reason. If you want to live comfortably in retirement without worrying about outliving your nest egg, then you’ll want to be diligent about your savings strategy. However, that’s only one piece of the puzzle. Another equally important part of retirement planning is making a wealth management plan for after you retire. How should you manage your money once you’re done working? Are there financial planning rules that you should be following?
The short answer is yes. If you want to keep your savings intact and your retirement goals on track, then you’re going to want to continue to be smart with your money, even in retirement. Here are some financial mistakes to avoid as you begin this exciting new chapter in your life.
Failing to re-adjust the risk in your portfolio.
As a young investor, taking on big risks with the markets can bring an exciting rush to your wealth management strategy. You have all this time ahead of you to bounce back from any losses that you might incur from a volatile market. As you approach retirement, however, your situation changes. You no longer have an extended period of time to recoup a loss should your investments take a hit. Not only that, but you’re going to start to need those assets that you’ve accumulated to help support yourself.
It’s crucial as you approach retirement, and then once you do retire, that you rebalance your portfolio to accurately reflect an appropriate amount of risk for your new situation. Your investment strategy should switch from gaining capital to one that prioritizes capital preservation over everything else.
A weak Social Security benefits strategy.
While you’re eligible to apply for Social Security benefits at 62, that might not always be the smartest money move. Applying too early could result in you receiving up to 30% less in benefits than you otherwise could have gotten if you waited. Not only that, but if you’re able to hold off on receiving benefits until you’ve hit your full retirement age, the government rewards you. Social Security adds a delayed retirement credit of 8% to your monthly payout for each year you hold off.
Though 8% may not seem like much, it’s most likely more than you’ll ever receive from any other current fixed products. In fact, an 8% rise in your monthly check is more than the annual 1.5% cost of living adjustments that Social Security benefits have recently been receiving.
Maintaining your old lifestyle.
Just as you should be taking a more conservative approach with your investments in retirement, so too should you be budgeting more conservatively. This doesn’t mean that you have to compromise your vision for retirement, but it does mean that you should be realistic about the kind of lifestyle you can sustain throughout your entire retirement.
Chances are that now that you’re no longer working, your income won’t be as high as it previously was. Even though a lifetime accumulation of savings can look like a huge amount of funds that you can dip into whenever you need to, there’s a solid chance you’re going to need to support yourself for upwards of 30+ years so you need to be sure that your money will last.
Think seriously about how much you have saved and how much you need to cover all necessary expenses, then work to make a budget that will keep you on a solid financial footing for the years to come.
Skimping on a plan for healthcare costs.
It’s no secret that healthcare costs are skyrocketing and they’re showing no sign of coming down anytime soon. As life expectancy seems to be rising right next to health care inflation, it’s no wonder that most retirees are worried about how they’re going to budget for healthcare costs throughout retirement. Next to housing, healthcare costs will most likely be your largest expense in retirement, so you have to be deliberate and smart about your healthcare plan, especially if you’ll no longer be insured through your employer. In fact, it’s estimated that a couple who retires at 65 will spend approximately $300,000 to cover their healthcare costs. That’s a serious amount of money.
In addition to that, you’ll want to have a plan in place for long-term care, as well. As you create your wealth management plan for retirement, be sure that you take time to think about how healthcare and long-term care will fit into that. You may want to look into getting a long-term care insurance policy to help ease the burden of costs associated with such services. Medicare is also an option for some, though there are many variations and complications so make sure that you do your research before signing on to any policy.
SEE ALSO: What Wealthy Retirees Fear the Most
You worked hard for your retirement savings; don’t blow it.
The more work you put into planning and preparing your finances for retirement, the fewer opportunities stress has to manifest once you’re retired. Chances are you worked extremely hard for the money in your retirement savings; you deserve to be able to enjoy the fruits of your labor. However, if you’re not smart about how you spend your money, you run the risk of blowing through your savings and finding yourself in a bad spot later down the road.
It comes down to having a smart, thoughtful, and comprehensive wealth management plan in place for your spending, coupled with an appropriate investment strategy to help sustain you throughout your retirement. At Andersen Wealth Management, we stay committed to helping our clients create a financial strategy that supports their retirement lifestyle and long-term financial goals. Schedule a no-obligation phone call with one of our advisors today to begin a conversation about how you can strengthen your retirement plans.