The shift to managing your money in retirement is completely different from the way you learned to manage money during your working years. And for many retirees, running out of money is their biggest fear. With the current state of the economy, the cost of healthcare and people living longer lives, it’s fair to be concerned. However, there are ways to help protect your money and make the most of it during your retirement.
Minimize Your Fixed Expenses
All of us have necessities like food, clothing, insurance and cellphone bills to name a few. However, there are certain areas in our lives where we can cut back, maybe your home is becoming a bit too large for you, or you no longer have the need for some of the things you spend money on monthly. Take inventory of where your money is going and the areas in which you can cut back in order to save up for your future.
Maximize Social Security Benefits
Many people are tempted at the thought of retiring at 62, however, the earlier you retire, the fewer benefits you’ll receive both now and in the future. Consider the amount of time you have ahead of you. Did your parents live into their 90’s? Plan to do the same, your money needs to last you for potentially 30 years, so it’s important to make wise long-term decisions.
Create a Spending Plan
It may not sound like fun, but creating a spending plan for yourself during retirement is a really simple way in which you can help prevent running out of money down the line. This isn’t to say you need to be frugal and can’t enjoy yourself, it just means it’s important to sit down and map out where you see your money going and how much you plan to spend on travel, leisure, entertainment, etc. Not having any kind of plan at the beginning of your retirement can greatly increase the chance of you running out of money as you age.
Don’t Forget About Inflation
Think back to how much a loaf of bread used to cost when you were young, or the price of gas when you first learned how to drive, there’s a massive difference between how prices were back then and how they are now. Even looking back 15 to 20 years ago, there was a big change in how far a dollar can get you, keep that in mind as you plan for your retirement. If you are planning to live for at least another 15 to 20 years, chances are prices won’t look the same as they do now. Being smart and saving extra to account for the cost of inflation can save you in the long run and prevent you from being low on funds as you get older.
Plan for Long Term Care
We all know it’s better to be overly prepared than underprepared, and the same goes for planning for what you might need during retirement. In most couples, there’s a good chance at least one person will require long term care, and that can put a strain on the other person if they are not well prepared. Depending on where you go and what your options are, this type of care can be expensive so it’s necessary to be ready if or when additional care is needed so that you aren’t caught off guard and left financially depleted.
Making smart decisions with your money during retirement isn’t hard if you’re prepared. It can be scary at times fearing what would happen if you run out of money, but with a little bit of planning and advice, you can cruise through your retirement with the peace of mind knowing you’re set for the rest of your life.