Tips for Managing Your Finances in Retirement

Living in retirement isn’t always life at the beach; it requires an understanding of key financial issues and careful planning, as well as a close, positive relationship with your financial advisor.

For a stress-free retirement, here are three of the most common mistakes that people make, along with suggested strategies for avoiding them.

Mistake #1–Spending too much too early

  • Periodically re-evaluate your budget to ensure it’s still realistic.
  • Determine how much you need to put aside to sustain your budget throughout your retirement.
  • If your savings don’t match up, gradually pay down debt and increase annual savings.

Mistake #2–Not knowing the consequences of taking distributions

  • Don’t withdraw funds without knowing the rules governing withdrawals.
  • Decide whether you can put off taking distributions until you reach age 70½, so your money can continue to grow tax-deferred.
  • Plan your distribution payouts according to your life expectancy. Withdraw as much as you need for living expenses while keeping the bulk of your assets working for you.
  • Withdraw first from savings and taxable investment accounts; only then turn to tax-advantaged accounts.
    • When you do tap tax-advantaged accounts, know the consequences.
  • Consider opening a Roth IRA. You can also roll over amounts in a Traditional IRA to a Roth IRA, if certain conditions are satisfied.

Mistake #3–Not knowing how and when to grow your assets

  • If you need your assets to grow over 10 years or more, consider putting the majority in stocks.
  • If you require current income, consider investing the majority of your assets in bonds.
  • If you seek stability of principal and don’t need to grow your assets, consider putting the majority of your portfolio in cash equivalents.