Building a new budget
If you have an existing budget, which you have faithfully followed for years, you will likely need to update it to reflect the changes in your lifestyle and income when you reach your 60s and 70s. All of the transitions that come with reaching retirement age impact your financial needs day-to-day. As your career draws to a close, and you start tapping into retirement funds, you’ll have a lot of considerations to make.
- Do you plan to work part time, take on a consulting role or move into an entirely new career?
- Do you have any non-work goals, like traveling or spending more time on hobbies?
- Do you have any long-term health needs that should be taken into consideration?
- What level of income can you expect from your retirement accounts, Social Security distributions, investments, continued employment and other sources?
Creating a budget that adjusts to your new situation helps you understand your cash flow and changing finances. Crucially, it also allows you to understand how much you can save going forward.
When should I start using Social Security?
Social Security offers an additional income stream for a majority of Americans who reach the minimum qualifying age of 62. However, as CNN Money pointed out, waiting until you reach the full retirement age, which varies based on the year‡ in which you were born, means larger payouts. The drawback is these payments are provided over a shorter period of time. If you have a strong retirement plan outside of Social Security, consider waiting until you hit full retirement age before collecting. Additionally, consider saving or investing some or all of your Social Security funds if your other retirement income can fully support you.
Keep investing after retirement
Retirement is viewed as a time to enjoy the fruits of many decades of labor, and you shouldn’t completely change your position on that front. However, you also need to account for the years that remain ahead, which means not spending too lavishly or ignoring the need for lifetime income. As The Motley Fool pointed out, an investment strategy for the future‡ is vital. Life expectancy has risen significantly over the past few decades, which makes it that much more important to address future financial needs. A strong mix of savings and investing is vital. Although the specifics will come down to personal preferences, market factors and many other important considerations, having a plan to both save and invest is vital for an enjoyable and financially stable retirement.
Consider savings for your healthcare
Regardless of your current health, consider how your needs may change in the coming years. You may already be already contributing to a health savings account (HSA) or have anticipated expensive long-term care. But if you haven’t included health care costs in your budget and savings plan, now is the time. Planning now for what may come is a solid strategy for maintaining your financial wellness.
Entering your retirement years is an exciting transition. Make sure your finances can keep up with your lifestyle with an effective and thought-out savings plan.
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