Today as seniors we can expect a longer retirement than our parents. That means you’ll have more years to finally do what you want to do. You may want to travel and spend more time on hobbies (not to mention treating your grandchildren). Managing money in retirement is therefore vital to your plans.
But a longer retirement also means that you will need to be smart with managing your money. You won’t have your regular salary coming in so will probably have a much reduced income.
Plan ahead so that you have a strategy to make sure your savings last through your retirement. Also perhaps consider ways to make money from home to supplement your pension.
Your own need for retirement money will depend on factors such as your health-care costs or whether you plan to earn part-time income. As with any major financial decision, you should consult with a financial advisor to help you decide what strategies are best for you. Advising people on managing money in retirement is one of the things they are trained for.
Social Security and Pension Benefits
You need to decide when is the best time to start using this money. These days many of us have flexibility to decide when to start taking our pensions. Your full retirement age could be anywhere from 65 to 67 under current laws. If you start taking money before that official date your monthly payments will be reduced permanently. But if you wait until your full retirement age you could receive significantly larger payments.
If you take benefits early, but continue to work, your benefits will be reduced until you reach full retirement age, if you earn more than an allowable limit. But if you go on working past your full retirement age and delay taking your pension you could get even higher benefits.
As a general rule, early retirement will give you about the same total Social Security benefits over your lifetime, but in smaller amounts. This is because it takes into account that you will receive them over a longer period.Obviously it will depend how long you live post retirement.
Pros and Cons of early retirement
There are advantages and disadvantages to taking your benefits before your full retirement age. The obvious advantage is that you begin receiving money earlier and collect benefits for a longer period of time. The disadvantage is your payments are permanently reduced.
None of us know what the future holds. There are many examples of people retiring, planning to do all the things they have dreamed of, only to die soon after retirement. That is why many decide to take early retirement.
Employer pension plans usually have options somewhat similar to those of Social Security. Contact your employer’s personnel department for guidance.
No matter when you decide to start receiving your benefits, remember that it could take several weeks to receive your first payment. Your payments can be deposited directly into your bank account so you don’t have to worry about payments getting lost or stolen in the mail.
Personal Retirement Savings Plans
As with your Social Security and pension benefits, you may want to delay dipping into your personal retirement accounts for as long as possible. This means they can continue to grow to cover unexpected costs in the future. However, if you need to supplement your income, Individual Retirement Accounts (IRA) in the US, Personal Pensions and ISAs in the UK, and other retirement savings can be a good source.
Before you start withdrawing money from your retirement accounts, most financial advisors suggest setting a target annual withdrawal rate. Make it low enough to avoid depleting your funds too quickly. You can fine-tune your withdrawal strategy each year, preferably with the guidance of your financial or tax advisor. For example, if your personal situation changes, you can adjust how much you withdraw.
Stocks And Shares To Fund Retirement
If you have investments then you should review your portfolio in the years coming up to retirement. You may decide that your emphasis should move to a safer less risky mix. When we are younger there is more time for a portfolio to recover if it takes a hit.
As we mature it makes sense to give up the chance of huge gains with increased risk for safer options to protect our money. Make sure your portfolio is well-diversified among stocks, mutual funds, bonds, and so on.
If you decide to get rid of some riskier investments you often don’t have to withdraw it from your account. You can move it in to cash or guaranteed return bonds. Or you could reinvest it somewhere else, such as in a bank savings account.
Interest rates are at an all time low for our lifetimes. Each person’s situation is different, it’s best to discuss your strategy with a financial advisor.
Ways To Make Money In Retirement
The other way to improve your money in retirement is to start an online business. You may have been looking forward to retirement for years and the last thing you want to consider is another job. But there are many ways to make money online that mean you can supplement your pension by making money at home.
If you decide to do this you have several options. Perhaps you have a skill related to your career that you can share with the world now you have more time. Or you may have a hobby that lends itself to making a blog to make money online. You may like this article on ways to make money online from home.
Starting an online venture is not only good for your wallet, but it is also good for your brain to learn new things. Learning a foreign language is often recommended as an anti aging technique. Why not learn the “language” of online money making and boost your finances at the same time?
Plan Early To Make Your Money Last In Retirement
You have probably worked hard for years and deserve a happy and stress free retirement. There are many factors that will contribute to this. Good health and relationships will have a huge impact on your later years. Keeping active in both mind and body is important.
But there is no denying that managing money in retirement is essential. Having money facilitates being able to do all the things you want to do now you have the time. The key is to start thinking about retirement long before it happens.