The Golden Age
MANAGING FINANCES DURING RETIREMENT
After decades of raising a family, pursuing passions and building a career, one comes at the age of retirement. This stage, if you manage to stay physically and financially healthy, can last for decades. But since the working days are over, your source of income will be the savings and investments that had been carefully kept during the productive years.
Managing finances is always important in any life stage, but it becomes even more critical during retirement since the income comes from a very limited source, rather than from monthly wages and earnings. You need to ensure that it lasts through the rest of your life. In the years leading up to retirement and old age, you must carefully consider how to manage your retirement assets most effectively.
SPEND LESS AND PROLONG THE RETIREMENT FUND
No matter how much was saved, the length of time that the retirement fund will last depends on the retiree’s lifestyle. Spend too much too fast and the retirement nest egg may soon be depleted. Limiting your expenses will be the key. To balance your income with expenses, keep a close track of monthly expenses such as food and groceries, including utilities like electricity, water, phone bills, internet and rent. Reduce or eliminate spending on “wants” or luxury items. Also, consider leisure and medical expenses.
Living expenses may fluctuate each year, depending on the cost of living and inflation. The current inflation rate is pegged at around three to four percent, so anticipate minor increases in spending as years go on. Taking a good look at weekly, monthly and annual expenses is one of the key steps that will determine if you need to make adjustments on your spending.
SWITCH TO SAFER INVESTMENT INSTRUMENTS
Even after saving and investing funds, there is a chance that the amount you planned was insufficient to last the retirement years. The increasing cost of living and lower-than-projected returns on investments are two everyday realities that retirees face. Should you need to strategize and reevaluate your financial standing, consider making your money work for you by engaging in lower-risk and safer investment instruments.
As you get older, make sure the money is more secure. Switch to mutual funds, UITFs, CDs and bonds. These are lowrisk investment instruments that may generate passive income, help prolong your retirement fund and earn enough to beat inflation. These can be excellent sources of income in retirement, but one should know when and how to withdraw money from them without paying any unnecessary withdrawal fees.
Whatever type of investment you will choose, the primary goal must be to protect what you have rather than generate high returns. Avoid aggressive or high-risk investments as much as possible. While these may promise high reward, retirees may not have enough time and energy to recoup the losses in case of failure.
KEEP AN EMERGENCY FUND
Retirees and old-age pensioners need to have an emergency fund or a reserve account separate from income-earning assets. Financial experts suggest that retirees must save at least six months worth of living expenses in the emergency fund, kept in a savings account that can be easily accessed should the need arise. The emergency fund is a safety net that the retiree can count on for unforeseen expenses that may come up during retirement.
A happy and financially secure retirement is possible if one makes timely review of retirement needs and income sources before the projected retirement date. And like other aspects of financial planning, handling money during the retirement years requires careful planning. Plan ahead and start making meaningful financial strategies, reassessing your financial status will help improve your financial capability during retirement. Should you need help in evaluating your available options, talk to your trusted financial planner. He may be able to help you plan — and fund — your retirement journey.