After a lifetime of working, you deserve to take a trip, buy your dream home, or play golf every day for the rest of your life, if that’s what you desire. But before you can get what you want in retirement, it’s important to make sure you have what you need first.
Managing your finances during your retirement years is much different than during your working years, so the following three-step process will help you stay on top of your retirement funds, so that you always have what you need:
1. Define What You Need
To prepare for living off your retirement funds, a great place to start is defining what your financial needs are going to be each month. While some pre-retirement expenses you had may become obsolete, such as saving for retirement, paying high taxes, and paying your mortgage, you can expect others to increase, like medical bills, insurance premiums, and so forth.
In the meantime, other expenses may stay the same if you continue on with your current lifestyle, such as car repairs, groceries, annual vacations and home insurance.
2. Determine What You Have
Even in retirement, most people will have income coming in from a few different sources, so it’s important to identify these sources and factor them into your overall budget. For example, you may be expecting income from Social Security and pension benefits,in addition to money from your SMSF property.
Then there is also your savings, the equity you have in your house, and money from investments that you may be able to draw on if you need to. Once you have a good idea of what assets you have and where any extra money will come from, you can compare this with your projected financial needs.
3. Decide What to Do
If, based on your budget, you can pay the bills, are well-insured, have enough assets, and are able to shoulder the consequences of a medical or financial shock – you are very lucky. For most people, however, the picture isn’t quite so perfect. If your numbers aren’t quite adding up, then you may have to get creative and figure out how to make up for the current or future deficit you may have.
In this case, your primary options are to change the way you use your savings orequity, return to work, or simply tighten your belt. Most retirees who need to make up for a large deficit opt for freeing up some equity in their home, either by downsizing or using equity release. On the other hand, taking on a part-time job may cover a small deficit easily.
Work with a Trusted Financial Adviser
Each person’s financial situation is unique, and the best way to stay on track and make the most of your retirement money is to work with a trusted financial adviser. A professional can help you decide how much savings you will use, in conjunction with any income you have, so that you can stay comfortable throughout your retirement.
While you spend most of your life making money and figuring out how to save it, your retirement years will be spent finding ways to use it properly. Effectively managing your retirement funds by making a financial plan is the best way to ensure that your retirement years can be some of the best years of your life.