Managing money after retirement is something that many people find stressful. With your time in the workforce finally coming to an end, the financial situation many find themselves in after the age of 65 may not be what they’ve grown accustomed to over the years. Depending on your spending patterns, both income and savings may be affected drastically as you get older.
Most people spend the majority of their lives working hard and saving a good amount of money for their future. Yet, after decades of employment and being disciplined about saving, many seniors may not be certain about how to allocate their hard-earned nest eggs in their retirement.
There are two reasons for this.
First, they’re apprehensive about running out of money. Second, they’re immediately transformed into spenders of assets, while no longer bringing in extra earnings in the form of a regular pay cheque.
Both of these factors can require some fine-tuning to your lifestyle. Here are a few tips to help you manage your savings wisely in your retirement.
Create a realistic spending plan
It’s crucial to design a realistic plan for living through your retirement. And it’s equally important to strike a balance here, mainly because you don’t want to miss out on the opportunity to enjoy this time in your life, but you also don’t want to run out of your savings too soon.
It’s imperative that you’re honest when looking at how much you spend (as well as where and why) because at the end of the day, you’ll want to manage it wisely and effectively. Allocating your expenses into goals, needs, and aspirations will enable you to manage your cash flow as it provides a better framework for living a comfortable life. And while you’re at it, make sure to prioritise things according to what is most important to you.
Determining a withdrawal strategy that suits you
Once you’ve created your spending plan, you’ll want to figure out how to downsize from your assets. This is where it can possibly get a little tricky. To start, we’d suggest having a “bucket” of guaranteed income comprising of pensions or annuities. This could cover immediate requirements such as food, housing, and utilities. Allotting your funds to these necessities would offer a sense of financial security that you’d still be capable of paying for life’s basic essentials even if you spend some money on travelling or on non-essential items.
Also, the amount you withdraw can seemingly vary at different stages of your retirement. For instance, if you’re more active and wish to travel more often and enjoy leisure activities, you may want to withdraw more early. Later, when you’re less interested in such activities, you may only require a smaller income to sustain your lifestyle.
As medical expenses also tend to increase with age, having a proper vision can be a smart approach for many seniors. The beauty of a smart and flexible withdrawal strategy is that you can relatively adjust based on your individual goals and personal requirements.
Be careful of the unexpected
While it’s important to map out a plan of action for withdrawal approach and spending outlines, it’s just as crucial to be prepared for the unexpected. With rising health-care costs and increasing life expectancy, it’s helpful to factor in any medical expenses when building an effective retirement planning strategy.
Another element to consider is; how do you know how long your retirement would last?
While it’s (unfortunately) impossible to know your exact life expectancy, you may consider the national life expectancy research and take into account the health immediate family members. Taking the time to consider memory impairment, long-term health issues or chronic illness later in life (and whether you have any health or insurance cover for this) – enables a more customized way to prepare financially.
Protect your legacy
If you intend to leave a legacy behind, you also want to make sure your wealth will be utilised in a way that aligns with your core values. This might mean setting up a savings account for your grandkids. Or, if you wish to see your loved ones enjoy the benefits of your savings while you’re still able to witness this, you could consider fixing an annual gift-giving account for them.
Remember, your estate comprises of everything that you own including personal property, cash, life insurance policies and investments. Having a living trust and, a will that is regularly updated, makes it easier to manage your legacy and ultimately renders you more in control. As a part of this process, it is also a good idea to validate your beneficiaries.
Make the most out of your transition
Retirement is not the end of the road when it comes to effectively manage your money and savings. Moreover, the transition from work and saving to retirement and spending can be a challenge. Many retirees find it helpful to take time out to regularly assess your situation.
The residents of SA Lifestyle Villages have understood the essence of a happy retirement and are strategically managing their savings whilst enjoying a peaceful lifestyle. Our over 50s retirement villages are exclusively planned to offer stress-free living to the seniors which further allows them to minimize their expenses to a great extent.
With a variety of amenities and services offered at no extra cost, our units in Kapunda, Port Pirie, and Moonta Lifestyle Estate are the most preferred options of living for seniors in Australia.
For further details, please call us on 0409 550 645.