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Smart Ways to Manage Your Money after Retirement

November 2017

By Erick Cutler

In recent years, the average work life has trended toward multiple employers throughout a career, an increase in entrepreneurship, delayed retirement saving and even later retirement ages. This pattern points to an undeniable truth: retirement has changed. It’s not as reliable as it once was, with Social Security, pensions and a gold watch providing a comfortable post-work life. For many, in fact, retirement isn’t even a given.

But there is a way to create enough wealth to last a lifetime. No matter where you are on your pre-retirement journey, or even if you’re already retired, you can develop a strategy that will allow you to establish the retirement life you want.

Plan for an Extended Post-Work Life

Studies have found that human beings may be able to live until the age of 115 in coming years, creating a 50-year retirement if you stop working at 65. While costs are usually lower in retirement, you may still need an average of $3,700 each month to sustain yourself. These costs will include food, housing, healthcare, transportation, insurance, entertainment, and clothing. Social Security payments could cover a portion of these expenses, but you’ll likely still be on the hook for the balance of these costs. That could add up to $865,000 over 30 years or almost $1.5 million if you live to see 115.

Unfortunately, many people underestimate both their lifespan and their budget during the retirement-planning stage, resulting in costly shortfalls down the road.

The ever-increasing post-employment lifespan will require a sound strategy for generating lasting income that can endure and grow.

Allocate Your Assets Accordingly

The first step is to make sure that you’re well-diversified so you can weather the inevitable market fluctuations that happen over the course of 30 or more years. A healthy mix of index, exchange-traded and mutual funds can decrease volatility, while stocks and real estate assets, for example, can provide high-level growth.

You should also consider bond investments. This asset class is a cornerstone of wealth protection strategies for a number of reasons:

  • They have set duration.
  • You know how much you’re getting at the end of the maturity date.
  • You can diversify within these securities to leverage various aspects or bond investment.

It’s essential, however, to understand all the considerations when it comes to bond investing. If for instance, you’re interested in municipal bonds, you need to consider your home state’s municipal bond rates compared to other states’. You’ll also want to think about how much you want to allocate to taxable bonds versus non-taxable bonds, as both the yield and terms differ.

Build a Sustainable Retirement

According to the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey, less than a quarter of workers are fully confident in their ability to maintain a comfortable retirement. The fear is that they’ll run out of money, forcing substantial budget cuts to make ends meet as they age.

To ensure that you’ll not only survive but thrive in retirement, you have to take full account of your current retirement strategy.

  • Can you meet the $865,000 to $1.5 million goal you’ll need to live 30 to 50 years beyond your retirement date?
  • Is your income made up of diversified investments that will be stable over the long term?
  • Does your retirement planning leave room for vacations, luxury splurges, declining health and financial emergencies?

In short, do you have a right balance of wants, needs, and priorities?

The solution here is two-fold: a retirement strategy that includes investments with real growth potential, as well as those that offer reliable yields to ensure that you can meet your long-term needs.

Manage Your Budget

You should also err on the side of longevity when you’re planning your post-retirement budget, accounting for additional years of regular living expenses, leisure, and medical costs. Your budget should also be a “living document,” allowing you to make changes and optimize your income and expenses for every stage of your life.

Just as important is making sure your investments are bringing in the money on which you are depending. Monitor your portfolio closely and make knowledgeable adjustments as necessary. Avoid the urge to bail out at every downturn, however. You’ll need the discipline to stay on track despite market ups and downs.

A successful retirement is the sum of many parts. Savings, investments, Social Security and, of course, your timetable are all integral to a retirement in which you flourish rather than falter. Whether you’re a firmly entrenched retiree or just starting to think about your post-work life, there’s no such thing as a perfect, one-size-fits-all plan. You should consult with your CPA to help you figure out the right balance of savings, investments, and income to ensure the security of your retirement. Contact the professionals at GPP today to start your retirement planning.

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