Managing Your Finances During Retirement

Managing your finances during your retirement years is so vital. It’s so important throughout all of the years, but especially when it comes to retirement. And we can’t stress enough that a sound retirement plan comes down to your cash flow and having a strong income plan. Maybe you’ve saved a lot of money over the years, but if you don’t have a plan as far as how you’re going to withdrawal that money, you could end up in some trouble. So we’re looking at this basic 4% withdrawal rule. And I know that’s come into question as of late, is that a sound plan? But for this case, let’s use this 4% withdrawal rate. So let’s take your retirement savings and for simple math, let’s use $600K and use this 4% withdrawal rule. That ultimately equates to $24K a year or $2K a month as a withdrawal amount from those retirement savings. Now the worst case scenario when I look at this with 4% ultimately represents 25 years assuming you have a 0% rate of return. So you’re drawing out this 4% for 25 years. That’s in the case where you stuck this money under the mattress and just starting taking that out over time. So if you’re 65 years old and you set this up, then essentially the money is going to last until you’re age 90. Again, assuming at 0% rate of return. Of course, that example that I just shared with you doesn’t factor in inflation, which is a huge part of your retirement plan, but part of that also you have to consider is with your Social Security. You’re going to have the cost of living adjustment with your Social Security. And the other piece is that typically when your statistics show us at age 75 and older, you maybe start cutting back on some of those expenses. Maybe you’re not traveling as much or going out to eat as much as you get into your late 70s, 80s in to your 90s. So when talking about income and expenses, there’s a couple of nasty words that come up: budget and taxes. These are so vital when you’re trying to map out a budget. And I encourage you, if you have things that you enjoy doing in retirement such as travel, that could be a big part of your overall budget. Make sure you’re factoring that in to the expenses that you’ve laid out or if you know I’ve got to replace the roof on the house. And that’s a major expense coming up in five years. Again, plan ahead and start maybe setting some of those additional funds aside in savings. And most of your retirement savings is probably in different retirement accounts: 401K, 403B, IRA. So don’t forget about the taxes and what impact that’s going to have on your withdrawal. So again, we want you to be confident in your retirement plan and we encourage you to give us a call and help you plan to retire well.