How To Manage Your Finances In Retirement
Are you ready to manage your finances in retirement? Whether you’re just heading towards the date, or already retired—knowing proven practices can help you achieve the retirement you’ve been envisioning.
A man in suit holds a ripped piece of paper that reads what is your plan for retirement?

What’s the best way to manage your finances in retirement? When it comes to managing your finances in retirement, it’s easy to think of it in three buckets. First: preparing. Second: planning. Third: prioritizing.

01 Preparing

Prepare for Shifts In Spending

While we call it one word, retirement, experts have identified 3 distinct phases of retirement spending. Many studies show that retirement spending has waves. At first, we may spend more on activities, travel and lifestyle. After this, we may spend less, preferring time at home and simplifying our choices. In later years, we may spend more on lifestyle changes and medical expenses.

By anticipating these natural ebbs and flows, we can be proactive—and prepared. If you want to get into the nitty-gritty, grab a retirement calculator and crunch the numbers.

Prepare for Health Expenses

While Americans are living longer, and living healthier, there are still many out-of-pocket health expenses. Some expenses are not covered such as hearing aids and eyeglasses. Other out-of-pocket expenses include deductibles, co-pays, supplemental insurance and prescriptions.

Staying healthy is the best way to mitigate expenses. Many people also choose to plan for supplemental Medicare coverage and long-term care insurance.

Prepare for Taxes

When it comes to managing money in retirement, look for an experienced financial advisor. Many professionals know a lot about tax efficiency, income tax guidelines. Be sure to look for one who can also advise you on strategic moves for drawing down retirement funds.

02 Planning

Plan Your Lifestyle

What is in your lifestyle playbook? What do you dream about? What do you want to make real?

By focusing on planning, you’re likely to get more specific. If you’ve been dreaming of doing a yoga retreat, do your research and book a spot. If you’ve always wanted to go kayaking in Alaska, what are you waiting for?

By planning your lifestyle, you’re likely to find that things that are less important fall away. Many lifestyle experts note that with a clear priority, people are likely to spend less money.

Plan Your Home-Style

If you are a homeowner, your home is part of your retirement financial strategy. For many people, home equity is the biggest source of wealth. At this time in your life, you may want to consider strategic moves related to your house.

If you are living in a house that is relatively expensive or too big for your current needs, you may be in a great position to downsize. Selling your home and moving to a location more suited to your present needs could be a smart way to manage your finances.

If you love your current home, a reverse mortgage could be a useful move. Check with your financial advisor to work out the details and evaluate the best solution for you.

Plan Your Planning

Things change. Even with the most detailed retirement plan, you change. Many couples have different ideas about how they want to spend time. Men may imagine time doing their favorite sports. Women might imagine hanging out with grandchildren, taking yoga classes, and volunteering in their community.

Many couples disagree on a vision for life in retirement. This leads to further disagreement about how much money is needed to maintain their desired lifestyle.

The good news? You can talk with your partner or spouse. Figure out what your plans are—now. Explore what you’d like to before you retire. And, if possible, make this an ongoing conversation. Planning together is something to do this year, next year, and throughout your retirement.

03 Prioritizing

Prioritize Retirement Income

As people are living longer, the old models of retirement and never working again may be just that. Old models. The newer model is: finding enjoyable ways to maximize retirement income.

If you have been thinking about this…you’re already tuned in to opportunities. Perhaps you’ve had an interest from earlier in your life that you’d like to pick up again. Making jewelry. Sculpting. Writing. Check out your options and prioritize boosting your income during retirement.

Prioritize Spending on Yourself

This is your time to enjoy life. This may mean a different approach than you took while you were actively earning and building your nest egg.

This shift in priorities could mean having some honest conversations with children, siblings, and loved ones. If you need help with this, talking with an objective friend, counselor or therapist can be useful to sort out your priorities.

Prioritize Your Priorities

Speaking of priorities…it’s time to clarify yours. Managing your money in retirement is the visible result of priorities. Said another way, clear priorities are the seed for healthy money management.

Some questions to ask for a successful retirement income plan include:

  • Shall we pay off the mortgage before retiring?
  • Are we funding our grandchildren’s college expenses?
  • How much expensive travel are we planning?
  • Are we planning to relocate in retirement?
  • Are we planning to live in other countries?
  • What is our housing strategy?
  • Are we on the same page with our vision for retirement?

With open dialogue, you and your partner/spouse can get on the same page. You’ll have a clearer and unified plan for moving forward.

Assistance Club Summary

The big idea: With preparing, planning, and prioritizing, you can use proven practices to manage your finances in retirement. By talking with your partner or spouse, you’ll be able to build a shared vision for your retirement—and create the financial plan to achieve your dreams.