A career lasts a long time. Decades. Sometimes half a century or more. And if you’ve planned well, you may have a substantial amount in your retirement accounts. When it comes time to retire, it’s tempting to splurge a bit, to celebrate all the work you put in and all you’ve accomplished.
However, spend too much early on, and you may risk putting yourself in financial jeopardy down the line. Spend too little, and you may not realize the full benefit of all that money you put away.
What’s the best way to be prepared? Use free online tools first to create your monthly budget, then to calculate exactly how much you will receive from each of your retirement accounts—including 401(k)s, IRAs and Social Security. A financial professional can help you figure out how best to use—or save—the difference.
Don’t be afraid to have fun – a new car, a dream vacation – but make sure to leave yourself enough to cover basic living expenses and any emergencies that may arise.
There is a lot to consider when it comes to how best to use your retirement funds. Here are some tips:
1. Consider how long your retirement will last. On average, a man reaching age 65 today can expect to live until age 84, and a woman of the same age can expect to live until age 87. For some people, that’s more than 20 years of retirement to figure out how to finance.
2. Using retirement savings to delay Social Security benefits can increase your expected lifetime income.
3. Have fun! But budget for it. Your more active years in retirement likely will be the early ones, so don’t be afraid to spend a little extra when you first retire.
4. Real estate rental income and a reverse mortgage are other options for increasing the amount of money available to you in retirement.
5. If you keep working into your 60s and 70s, you can earn extra spending money, keep socially active, and – most importantly – delay receiving Social Security until age 70. This helps make your retirement savings last as long as possible.
6. Don’t try to “make it work” if it won’t: If you don’t have enough money in your accounts to retire comfortably, consider ways to make your work more enjoyable, allowing you to keep working and keep contributing to your retirement.
7. Moving to a smaller home or refinancing your current home can free up additional funds.
8. Make sure you save enough for medical expenses or think about a supplemental Medicare plan. Medicare doesn’t cover all medical expenses, including hearing aids, eye exams related to getting glasses, and most dental care. Depending on your personal health situation, it also might be wise to think about long-term care insurance.
9. Don’t forget about money that might be available to you in a pension plan from a previous job.
You worked hard and you deserve to take advantage of all that retirement has to offer. For some people that means a two-week vacation every year; for others it’s having enough money in the bank to spend time with family and friends without worrying about finances. Consulting a financial professional can help you create and stick to a plan that works for your individual situation and goals.