Managing Money in Early Retirement

As we’ve noted before, retiring can feel like a culmination—the culmination of your working life and also of your careful financial planning—but that doesn’t mean it’s the end of the line. Even once you put in your notice and leave the workforce, you still have to work diligently to ensure your financial plan remains on track—that your retirement plan remains steady and secure, through market fluctuations and lifestyle changes.

A lot of this comes down to money management. You will still be receiving an income in your retirement—distributions from an IRA, or, perhaps, Social Security, to name just a couple of examples. A big part of prudent retirement planning is making sure you budget and spend wisely.

Lifestyle Issues

Some of this comes down to issues of lifestyle and the way you spend your time. Will you be golfing once you retire? Going out on the boat every day? Traveling the world with your spouse? All of these activities can be great and rewarding, but they are also potentially costly.

A good idea is to try to get into them as early as you can, perhaps even before you fully retire. See how you like them, and estimate how much time and money you’ll really want to spend on them. This will help you create a more effective retirement budget.

Refine Your Budget

The concept of a retirement budget is crucial; you’ll want to make certain that your withdrawals are in sync with your expenses, but also that you’re not withdrawing too much. Remember that a retirement account grows cumulatively, and withdrawing too much too soon can hamper its accumulation.

We blogged about retirement budgeting here; we will only add that the first three years of retirement are especially important as you seek to get a handle on what kind of expenses you will have and how much you need to withdraw each month.

Give Yourself a Cushion

Another piece of advice for those early years of retirement: Have a cash cushion, or even some short-term bonds, that are separate from your primary retirement savings. This is not always an easy thing to accomplish—for some, putting aside a significant retirement nest egg is difficult enough on its own—but having a couple years’ of living expenses, readily on hand, can provide an extra layer of protection against market downturns or lower-than-expected retirement savings growth.

Think Long Term

A final thought: Even in the early days of your retirement, you should be thinking toward the future. Meet regularly with your advisor and ensure that your nest egg continues to grow. More than that, though, double down on your healthcare planning, and make sure you are planning and saving even for potential long-term care expenses.

To learn more about any of this, contact the Stonepath Wealth Management team today!