For much of your working life, your financial goals may have centered around planning and saving for retirement. Now that you’re in the home stretch, you may be thinking about how to spend your retirement savings once you stop working. In order to make your retirement income last for the rest of your life, you need to plan your spending wisely. These four steps should set you on the right track to a successful retirement.
Create a budget. Analyze your budget and regular cost of living. A portion of your guaranteed income should be designated to your day-to-day expenses. But remember that your needs may change, and your budget will have to change with it. Set aside some money for emergencies. Once you have covered regular living expenses and you’re diverting some funds into a liquid savings, any leftover money can be reinvested or spent on luxury purchases.
Don’t forget about health care. Hopefully, your good health will hold out for many years to come. But since health problems can be unpredictable, the budget you set at the beginning of retirement could change drastically in a short amount of time. You may want to purchase long-term care insurance to cover nursing home care, and plan to devote more of your budget to health care expenses as you grow older.
Have a little fun. Once your long-awaited retirement date finally arrives, you might feel tempted to splurge on a large purchase. There’s nothing wrong with finally going on that European vacation or buying that boat you’ve always wanted – as long as you consider the long-term impact on your retirement. Don’t deplete your retirement income at the beginning of retirement. Instead, share your goals with your financial advisor long before retirement, so that this big purchase can be considered when establishing your retirement budget.
Retirement planning doesn’t end at retirement! Once you begin taking your retirement income, you should continue to plan for the future. Meet regularly with your financial advisor to talk about your goals, spending, and budgeting strategies. These regular meetings can help you keep your spending in line with your financial abilities and life expectancy.
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