MONEY MANAGEMENT

Money Management Pays Off in Retirement

by Mary Morrison

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FOR MANY PEOPLE, retirement signals a new beginning. No more working for the man! Days spent doing exactly what you want, when you want. Golf five days a week? Sure thing, provided you have the finances to fund your obsession. Just know that retirement can lead to big changes in your financial priorities. That’s why a smart money management strategy makes sense for retirement, making it easier and more efficient. Follow these tips to get started.

DETERMINE YOUR FINANCIAL POSITION

Most retirees have some idea of how much money they need in retirement, and how much money they have to finance it. (To get a general idea for yourself, try one of the online retirement calculators or contact your financial advisor.) Many usually have a reliable monthly income source such as Social Security, a pension or an annuity, and a retirement savings, which may be in the form of bank savings accounts or investments such as a 401(k) or IRA.

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Smart money management starts with maximizing these monthly income streams. This means making informed decisions about when to start withdrawing Social Security or a pension. Then, the next priority becomes figuring out what to do with your cash and investments to protect yourself against inflation risk and running out of money too soon.

Many factors affect how to navigate this. Speak with your financial advisor to determine your best strategy that addresses the following considerations: your age and life expectancy, the types of assets you hold, your tax situation and the taxes you’ll have to pay for receiving income from different sources, and your investing and money management expertise. Once you know your financial position, switch your focus to how you manage your money. With time and money saving options, you’ll be glad you did!

CHANGES IN HOW YOU RECEIVE INCOME

In your working years, you likely received weekly, biweekly, or monthly pay. Now, your income can come in a number of ways and times. Think Social Security, pension and annuity payments, distributions from retirement plans, or even employment income. With income coming in from numerous sources, setting up direct deposit to the financial account of your choice will help manage everything efficiently.

SPENDING DIFFERS, TOO

Just as income changes, so does your spending. Your spending habits reflect your retirement lifestyle and new financial priorities. Retirees may find themselves paying quarterly state and federal income taxes, health care and other insurance premiums, and expenses incurred by travel or living in seasonal residences. Given these new expenses, simplify further by using financial management tools such as online or mobile banking that make it easy to perform financial transactions from just about anywhere.

WHEN INCOME EXCEEDS SPENDING

If your income exceeds the amount you spend each month, use this to your advantage by managing the excess to help your short-term cash needs and longer-term financial stability. Break down your needs into three different short and long-term goals for the best outcome:

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2. Keep a portion of your funds easily accessible for paying living expenses such as food, utilities, and transportation.

Consider a savings account to stockpile funds for short-term savings goals such as a new car or yearly vacation. 3. Lastly, keep at least six months of expenses for emergency expenses in a separate, highly liquid account.

GROUP ACCOUNTS FOR EASE

Successful money management calls for easily accessible, moveable, and investable funds. Consider consolidating your funds into a group of accounts with a single provider to allow for easy transfers between accounts. For example, you might choose a checking or brokerage account for paying the bills that offers a selection of electronic options including mobile or online payments or mobile check deposit. You’ll also want options to easily transfer money from your retirement accounts, such as IRAs, into your cash account. Select the features you need to make your retirement finances affordable and flexible.

A NEW BEGINNING

Retirement signals a new financial beginning for many retirees. Understanding your financial position and utilizing a good cash management system can serve you well, leaving you with more time to enjoy your golden years. With all the time you’ll save, you could easily fit in another round of golf!

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