George Liakakis
You spent decades working hard and making careful financial decisions to build up your retirement savings. In retirement, your financial perspective shifts, and your financial decisions will be considered through a new lens. During this time, you will be living off your retirement savings, while ideally continuing to grow your money.
For today’s seniors, retirement could last three decades or more, and you’ll probably make different financial decisions at 65 than you would at 75 or 85. Here are some basic principles retirees can consider when it comes to financial decision making. With that in mind, your advisors are there to help you evolve your plans over time.
Commit to annual budgeting.
Budgeting is vital in retirement to help preserve your finances for years to come. Retirement is surely the time to enjoy newly-found free time, take up hobbies or plan those bucket-list trips. You just want to do so with the future in mind. You may incur new medical expenses if medical issues arise, or if you need some more help around the house. You may also choose to help children or grandkids with financial support. Budgeting can be key for enjoying a satisfying retirement. You can do things you love knowing that you’ve earmarked money just for those indulgences.
Creating an annual budget presents an opportunity to take a 360-degree view of your financial situation. Your advisors can help you account for all your current retirement income, assets, investments and expenses. You can’t design a budget that’s aligned with your financial goals unless you start with accurate and complete information.
Your annual budget will likely change from year to year in retirement, so it’s advisable to revisit it every year. Your income and expenses may change. New tax laws, new medical issues, changes in the stock market, and other events may impact your plans too.
Have a plan for timing withdrawals and Social Security benefits.
Where should you take money from to pay for medical bills that weren’t covered by insurance? Or just to buy groceries? Between your savings accounts, emergency funds, retirement accounts and other investments, there may be many places to turn to.
Timing is key whenever you’re making decisions about withdrawing money from retirement savings. Minimizing taxes while continuing to earn interest is the goal, but it can get complicated when you have multiple sources to consider. Should you withdraw money from tax-free accounts or taxable accounts first? Past age 73, how will your required minimum distributions from retirement accounts fit into your financial plans? How does Social Security fit into your plans?If your spouse has their own Social Security benefits and retirement savings, that gives you even more options for ways to structure your withdrawal schedule. Your advisors can use models and projections to help you compare those options and make the financial decisions that are most aligned with your goals.
Stay proactive about investment planning.
Your investment planning priorities may not change immediately when you retire, but many investors do transition to a lower-risk portfolio mix at some point. You might be someone who anticipates living another 30 years and wants to keep their portfolio focused on growth well into retirement. Other investors don’t want to live with the stress of having their retirement money tied up in volatile stocks. Share your goals and preferences with your advisor, and they can put together a schedule for revisiting your portfolio and consider changes to your asset allocation strategy if necessary so you’re always comfortable with your level of risk.
Be prepared to accept some help with financial decisions.
Even if you’re someone who has always felt comfortable making their own financial decisions and managing all their own affairs, you may not always have those cognitive abilities. Memory decline could cause someone to make poor financial decisions, and they may not even realize it’s happening.
Unfortunately, retired people are also a target for financial scams. These scammers are really good at finding new ways to deceive people so vigilance is key. If someone seems off, call your advisor before making any decisions.
As you get older, it becomes increasingly important to have a support system in place. Helping you avoid financial mistakes can be one function of that system. Consider including a financially savvy kid or other trusted relative in your financial planning conversations along with your advisors. You could even choose to make one of them responsible for financial decisions if you are no longer able to make them.
Don’t take risks with post-retirement financial decisions.
Sachetta’s wealth management advisors are here to provide the guidance you need to feel confident making well-informed post-retirement financial decisions. Let’s talk about tax planning, investment planning, Social Security or whatever else you’re navigating. Contact us today!
George Liakakis, CPA, CFP® , MSA is Sachetta’s CFO and holds a Master’s Degree in Accounting from the University of Massachusetts Lowell. He is a licensed financial advisor. He focuses on both business and individual taxation, as well as financial planning.