By Andrea Needham, Eldersday.org
How to Successfully Manage Your Money in Retirement
Retirement comes with many wonderful benefits. You have a lot more time to do the things you want, whether it’s traveling, pursuing passion projects, making memories with loved ones, or taking control over your health and fitness. But retiring also means trading your comfortable salary for a fixed income. Good money management is essential for stretching your savings and making the most of your retirement income! Check out these practical tips from United We Age to learn how you can manage money effectively in retirement.
Evaluate Your Financial Risks
While you may be comfortable living on your retirement income, for the time being, you need to be aware of potential risks that can have an impact on your finances down the road. For example, inflation can reduce the spending power of your fixed-income sources. Stock market fluctuations can jeopardize your savings. Unexpected medical costs can put an unanticipated strain on your finances. And changes to public programs like Medicare could leave you on the hook for new expenses.
Since retired households tend to spend more on travel, health care, moving, fitness, and debt than working households, it’s important to stay on top of your finances. Being aware of your financial risks will help you live within your means and ensure you always have money for the things you need.
Consider Downsizing to Save Money
One way to keep your expenses under control in retirement is to downsize your home. Downsizing into a smaller space can help cut the cost of home maintenance, utilities, mortgage interest, and property taxes. Beyond cost savings, downsizing can free up time you currently spend cleaning, performing home repairs, cutting the grass, tending the garden, and tackling other household chores. Downsizing is also a great chance to move somewhere new!
Just keep in mind that location can matter more than the size of your home when it comes to cost savings. To maximize the cost benefits of downsizing, look for a home in an affordable area. You can use online tools to find properties that fall within your retirement budget.
Get Comfortable Making Trade-offs
When you retire, it can be tempting to spend a lot of money doing everything you never had time for when you were working. But you must be prepared to make trade-offs. Know what’s important to you and prioritize your spending on these areas. For example, if you want to travel, you might need to make cutbacks in other areas of your life. This might mean cooking more meals at home instead of eating out or choosing free activities like visiting parks and libraries instead of paying for entertainment. Make trade-offs so you can do what you want now while still saving money for things you might need in the future.
If you don’t have enough money to do the things you enjoy, you could consider taking on a part-time job. Many seniors find success starting their own businesses by offering services in a variety of fields including pet care, tutoring, and writing.
Make a Plan for Future Care Expenses
Medical and caregiving costs catch a lot of retirees off guard. The thing is, you can’t always predict when you’re going to need care. The most recent data projects that a 65-year-old couple retiring in 2021 can expect to pay about $300,000 in health care costs over the course of their retirement.
Proactive planning is key for covering these expenses. Make sure you understand what Medicare does and doesn’t cover, consider supplementing your coverage with additional insurance, open a health savings account (HSA), and consider getting long-term care insurance. The Motley Fool also stresses the importance of maintaining an active and healthy lifestyle to reduce your healthcare expenses through retirement.
Whether you’re planning for the future or you’re already deep in the throes of retirement, financial management will play an important role in your ability to afford the things you want and access the services you need. Stay on top of your financial health today so you can ensure your financial security for the future!
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