Retirement is something that many of us look forward to all our adult lives. We plan for it, daydream about it, and hope for it to be healthy, enjoyable, and financially secure. When the big day comes, though, and you make the transition from regular paycheck to none, it can be a little daunting. Have I saved enough money for retirement? You may start to wonder.
When you reach this point, your focus shifts somewhat away from retirement planning and toward retirement income management. What are you going to do with the money that you have saved? How will you manage your savings to ensure that they outlast you, and not the other way around?
Don’t Think Too Big
As such, it’s important to make sure that as you plan, you’re focusing on the right number. For most of your life you will focus on the big picture—how many total dollars you have saved for retirement. Once you actually retire, though, it may be smart to shift your thinking and focus on a different figure—the specific amount of money you will need each year.
This number really means more to you, because it helps you establish a viable retirement budget. It helps you ensure that you’re not living beyond your means. And it puts into context the broader retirement savings total.
Keep Growing Your Nest Egg
Another important consideration for retirees: Just because you’re drawing your income at least partially from your retirement savings, that doesn’t mean you can stop growing those savings. You should always be working to expand and maximize those savings, even when you’re also taking some distributions on a monthly basis.
What will this look like for you? That’s something to address with your financial planner. Know that retirement doesn’t necessarily signal the need to go conservative in your investing, though; you may still need to be taking some minor risks and actively managing that retirement portfolio to ensure its continued growth.
A final thought: Historically, financial planners have advocated for a 4 percent annual withdrawal rate. This may or not be the right move for you. Certainly, you need to think about withdrawing responsibly, but there are plenty of options to consider. A fixed annual dollar amount makes budgeting easy, though it fails to account for inflation. A fixed percentage is another approach; or, you can simply withdraw investment earnings.
This is another concept to talk about with your financial planner. The important thing in all of this is ensuring that you’re smart in managing your retirement income—using it responsibly, and growing it as much as you can.