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6 Retirement Tips You Need to Know

Most of us have an ideal in our minds about how retirement should be.  As we travel through our working years, we dream of spending time with grand kids or relaxing on a beach somewhere once our working days are done.  But make sure to anticipate how your finances will change in order to be fully prepared for that desired retirement.  Marketwatch’s Robert Powell tells us what to watch out for in “Don’t Let These 6 Surprises Wreck Your Retirement.”  While it sounds simple, the first piece of advice is to live within your means.  It absolutely works to keep you on track to live within or under your means.  Try not to buy anything that you cannot actually afford before buying.  Set a budget and stick to it.

Your budget will certainly change in retirement, but not necessarily how you think it will.  Most people assume that their budget will decline in retirement, but new expenses replace old ones a lot of the time.  You also have to keep in mind that you have more time on your hands to spend money when you aren’t working all day.  Typically, you can assume that your retirement budget will be about 80% of your working budget, but make sure to figure it out well before you have retired.  Manage your health care costs and see how your employee benefits transfer into retirement.  Most people grossly underestimate how much their health care will cost in retirement.  If you won’t have employee benefits in retirement, the cost of replacing those health care benefits is very high so you need to budget for it.

Account for inflation in some type of your retirement planning.  While your Social Security payments will increase with inflation, most pensions and other retirement plans will not.  Many retirees opt for an inflation-adjusted annuity to make sure that some of their retirement income keeps up with increasing inflation.  You need a completely different plan for withdrawing money than you do for the saving years.  Make sure to speak with a financial professional and develop a plan for withdrawing from your retirement savings.  Withdraw from the right type of accounts at the right time, depending on the tax consequences and how the markets are doing.  Even if you think you will, chances are good that you won’t be able to work forever.  Plan to stop working at some point and if you work past that because you love it, than that works out even better for you.  Don’t rely on working to an old age when you might not be able to.

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