Money Management During Retirement

School of Financial Wellness

Image of an employment status form, with the box for retirement checked and the words enjoying life written in the occupation box.

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If you’re in retirement, first off, congratulations. It takes a great deal of work and planning just to get here, so it’s time to relax. However, the need for managing your money does not disappear after retirement, and unhealthy money management practices can add unnecessary stress later in life.

Now that you’ve retired, your income situation is likely quite different than while you were working. That means your money management techniques may need some adjustments. Here’s a few things to keep in mind as you enjoy your retirement years.

Maximize Sources of Income

One thing that remains the same in retirement is retirees need to use their income to meet their expenses. However, the sources of income have likely changed, and income streams are likely much smaller. This means maximization of these sources is crucial.

The main income source for most people during retirement will come from retirement accounts. Most of the tax-advantaged retirement savings accounts will mandate ‘required minimum distributions’ [RMDs] after a certain age, such as traditional IRA’s, 401(k)’s, and 403(b)’s to name a few. Because of RMDs, it is important to know your safe withdrawal rate, or the amount you can take from your savings without hurting the purchasing power of your investments.

Social Security benefits and pension distributions are other very important sources of income for many retirees. In most cases, pensions are like Social Security, and annual income from these sources can be maximized if you wait until the latest possible date to start making withdrawals. Maximizing this revenue can be very beneficial, especially for those who live a long life. However, if you wait to begin taking your Social Security or pension later in retirement, keep in mind that you will need income to bridge the gap between when you retire and when you start receiving this income. Some pension plans may also allow for a lump-sum payout as opposed to a series of monthly payments, which may be attractive for some in special cases.

Other common sources of income for retirees are regular savings accounts, income from owning a business, and downsizing of a residence to access home equity. Maximizing your cash inflows must also be done in a tax efficient way. A great way to make sure you are maximizing your retirement income is to speak with an experienced wealth manager at Meld Financial to develop your Financial Fingerprint™.

Minimize and Manage Your Expenses

The composition of your expenses has likely changed from their pre-retirement state. For example, you may be spending less on your daily commute and business attire, but you may spend more in other areas, like travel and healthcare. That’s why it’s critical to pay close attention to your new spending patterns and adjust your spending plan accurately.

Recurring expenses like food, shelter, transportation will likely persist throughout your retirement, so you should work to minimize those expenses as soon as possible. Another positive effect of downsizing your home is that you may be able to lessen your property tax burden and other expenses.

As most retirees are living on a fixed income, managing expenses is where they have the most control over their finances. After all, cutting back on expenses is much easier than finding a new source of income for most people in retirement. That’s why an effective spending plan is one of the single biggest success factors in enjoying a long, comfortable retirement.

Optimize Your Portfolio to Meet Your Retirement Goals

Most retirees will need to draw from their savings to meet their expenses as they progress through retirement. While it may be tempting to shift your retirement savings to the safest possible investments when you retire to protect your nest egg, this could leave income on the table.

One of the most important features of your investment portfolio is that it contains the least amount of risk that you need to meet your goals, and rarely does this mean you will have all your investments in risk-free assets. After all, you will need to beat inflation to prevent losing wealth, and those who live a long life may need income for decades.

An experienced wealth manager, like those on our team at Meld Financial, can assist you in developing a portfolio that meets your goals without taking on excessive risk. In fact, there’s no easier way to develop your plan that getting your Financial Fingerprint™ at Meld Financial.

Comprehensive Wealth Management at Meld Financial

If you’re looking for an effective team of professionals to help organize your finances before or during retirement, contact Meld Financial. At Meld, we can leverage our vast experience, in conjunction with a team of financial and legal professionals, to help you develop your Financial Fingerprint™.

Your Financial Fingerprint™ is a unique wealth management process developed here at Meld through more than 30 years of managing our clients’ wealth. In short, your FINANCIAL FINGERPRINT™ is a plan that is quick to assembleeasy to understand and simple to modify as your circumstances change. If you’re ready to talk, click the “Get Started” button on our home page to schedule a meeting with a member of our team – at your convenience.

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Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - Chairman - Meld Financial

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