Do you feel anxious, or even a little guilty, each time you withdraw from your retirement savings? Whether you recently retired or are already retired for a few years, it can be hard to go from saving to spending mode. Here are some strategies to help you get more comfortable with this transition.
Looking back and looking forward
You likely prepared for retirement over many years. Saving. Making sacrifices. Your hard work has paid off, and you finally made it. It’s time to make all those dreams a reality, and guilt mustn’t be a part of it. It is time to enjoy your retirement with confidence.
If you don’t already have a monthly budget, create one by calculating your monthly expenses. This will help you figure out how much income you need each month to cover them.
Here’s something to consider. When you were working, you received a paycheck. That doesn’t have to end in retirement. Now, instead of relying on an employer to pay you, you’re paying yourself. Here’s how to do it:
- Consider a separate account for retirement spending. This will make it easier to keep these funds separate from your other investments and allow you to see exactly what you have available for spending.
- Plan to have a year’s worth of income needs in the account, fund by outside sources – such as social security, pensions, annuities, and the amount you need from your portfolio. This amount should be separate from the cash you set aside for emergencies.
- Continuously maintain the balance so that you always have a year’s worth of cash in the account.
The accounts and investments you use to “refill” the balance in the account may vary from year to year depending on your investment and tax considerations.
Start smart and keep smart by regularly review your spending strategy. Transitioning from savings to spending is a lot easier when you have someone to guide you. A financial advisor, one that specializes in retirement income, can help you ensure that you are spending at a rate that can provide for your needs today, as well as into the future, and then review this strategy to ensure you remain on track.