Here’s How To Enjoy Retirement Without Going Broke

Many retirees dream of spending the end of their earning years relaxing or pursuing their hobbies, but nobody wants to go broke in the process. Luckily, with careful planning and the right investments and lifestyle changes, you can afford to retire the way you want to.

How can you make the most of a long retirement? Keep reading to learn more about financial planning and budgeting to avoid going broke in retirement.

1. Before Retiring: Make A Financial Plan For Your Golden Years

Everyone talks about building a retirement plan with enough money to pay for living expenses, but many retirees don’t know where to start. Luckily, you can take many low-effort yet high-impact steps to secure your future.

Here are a few things to consider as you start planning for retirement.

Set Financial Goals And Stick To Them

No matter your age, you can start building your savings for a nest egg that will support you when you retire. We recommend setting aside a fixed portion of your income and putting it into a high-interest retirement account to protect your cash against inflation. Start small and save the same amount every month until it becomes a habit.

List Your Retirement Needs

Will you need long-term care as you approach retirement age? Consider your current expenses versus what you expect to be shelling out for essential services. Once you have a rough number, add some leeway to the budget to maintain your lifestyle, account for unexpected expenses, and retire comfortably.

Contribute To A Retirement Savings Account

If your company offers a worker’s retirement plan, set aside some money from your income for contributions. If you don’t already have a program at your job, consider asking your employer for one. Many of these services are designed by a certified financial planner, making managing a budget much more straightforward. We also have an article here on how to save if you don’t have a 401(k).

Learn Basic Investment Principles

Many seniors don’t want to continue working as they approach their golden years, but retirement income is essential for paying off living expenses. Learning about basic investment principles can create a secondary income source that will keep extra cash coming in for years.

2. Live A Frugal And Modest Lifestyle

It doesn’t take a certified financial planner to know your lifestyle will change during retirement. Assuming you’ll be able to keep up your old spending habits while being able to afford the day-to-day costs is one of the biggest mistakes you can make. After all, you can’t rely on a job or other primary source of income when you retire. 

So, what can you do?

The best thing retirees can do for themselves is reevaluate their finances around the amount of savings they currently have. One way to cut extra costs like recurring subscriptions for a service you no longer use. 

Another option is to take advantage of your city’s public services to save money where it counts. For example, going to the local community centre to stay in shape and maintain your health may be just as effective as (and way cheaper than) buying a membership to a fancy private gym.

One of the most significant ways to avoid going broke in retirement is by downsizing your home. This cuts down on annual property taxes while also making it easier to maintain and clean your home as you age.

3. Focus On What Matters To You

While we recommend that retirees avoid spending too much money, that doesn’t mean you’re limited to a life spent indoors doing absolutely nothing. Instead, focus on what matters to you. 

For example, if you’d like to spend time with your family, go on vacations or invest more time in your health. You can do that without cashing out all your retirement money.

However, there is one major thing you need to consider when making these decisions. Namely, you should expect to cut down on other additional costs that don’t matter as much. It’s all about figuring out your priorities in life and focusing on them when you retire.

4. Find A Low-Stress Source Of Income

Generally speaking, most seniors don’t consider the idea of going back to work after retirement. However, this is because the concept of “work” is associated with showing up at a job and getting paid instead of fulfilment. Of course, that changes when you retire.

If you’re still physically able, finding a low-stress source of retirement income doing something you love can be a life-enriching experience. That means you can finally spend some time working on that from-home bakery you’ve wanted or even write a book without having to worry about a backup plan.

5. Use Your Senior Discount

Just because you’ve entered the retirement phase of your life doesn’t mean the cost of living suddenly drops. Luckily, most establishments, hotels, restaurants, and even health-related businesses honour senior discounts. 

We recommend asking all your favourite places about their senior policy as well as special or seasonal deals exclusively available to older shoppers.

6. Leverage Your Social Security Income

A big part of financial planning for retirement is considering all the potential income you will receive from revenue-generating assets, IRAs, and investments like stocks and insurance. However, many older individuals may not have access to these and instead rely on Social Security benefits. 

If this is the case for you, then there are a few ways to leverage your Social Security benefits for the best possible payouts during the latter years of your retirement life. One of the most impactful (and simplest) options is to delay receiving any benefits by a few years. Let us explain. 

Legally, all US citizens are considered at “full retirement age” by 66 years and 8 months of age, which allows them to start collecting from their social security fund. A retiring individual is sent a check based on their average monthly income from the highest-paid 35 working years plus adjustments. 

If you can afford it, wait until you’re 70 before you cash in on your retirement fund from Social Security. Social Security pays you for the years you didn’t withdraw from your retirement savings, so you can bolster your monthly paycheck by hundreds of dollars – making a significant difference for retiring individuals who require long-term care. 

Also check out our articles on retiring with $4 million, and saving for retirement as a 40 year old.

7. For Investors: Be Disciplined And Mind Your Risk Appetite

If you’re stock market-savvy, chances are you’ll be able to withdraw a healthy amount from your portfolio as you retire. However, there are a few things to consider as you transition from working to retired life.

Namely, we recommend reevaluating your risk appetite. As you funnel cash into stocks and bonds, keep in mind that you could lose your money. The cost of learning how to trade and invest may be recoverable for a working person, but this might not be true for older individuals. As a result, it’s best to shy away from high-risk transactions that can potentially cost more than they’re worth.

So, what’s the smartest move for senior investors? The answer is liquidating volatile stocks and reinvesting in stable bonds that can pay out healthy dividends from your portfolio regularly. 

8. Seek High Interest Rates For Savings Accounts

The traditional school of thought when building savings accounts for retirement expenditure is to park all your money at an old and established brick-and-mortar bank. However, these financial institutions usually have low interest rates that can’t keep up with inflation. That’s where digital banks can make a difference. 

Because many new institutions have lower overhead costs, they can pay out bigger interest rates. In addition, some of them offer time-locked deposits for forced savings, while others allow clients to deposit and withdraw as they please. 

However, there is one considerable drawback to choosing a digital bank over a traditional one: the vast majority of them lack local offices. This leads many people to feel like their money may be unsafe or susceptible to exit fraud. 

To mitigate this risk, we recommend only working with banks that have local offices and offer insurance for potential losses.

Final Thoughts

Planning for retirement can be daunting, especially when most financial experts, insurance companies, and banks recommend starting early. However, there are many ways to build a financial safety net for you and your family. The best part is that most of these options don’t require more hours at work or time spent abstaining from the things (and people) you care about the most.

Now that you know what it takes to stay in good financial health after retirement, it’s time to do something about it.

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