Getting ready to retire can be an exciting time. After decades of hard work, you can look forward to spending your time relaxing, traveling, and enjoying hobbies. However, once you retire, the transition from being a “saver" to a “spender" can be daunting. When the time comes to start spending your hard-earned savings, you want to be sure your retirement income lasts for the rest of your life. Here are a few tips that can help you spend and manage your money wisely in retirement.
Make a realistic spending plan
While most people follow a savings plan to get to retirement, many forget to make a plan for spending through their retirement years. To avoid this problem, create a budget that estimates how much money you'll need to maintain your desired lifestyle once you retire. Calculate your expected monthly cost of living, including your day-to-day expenses. Then, take into account discretionary expenses such as hobbies, donations to charity, vacations and gifts. Any leftover money can be reinvested or designated for larger expenses such as traveling, a new car or a vacation home. With a retirement spending plan in place, you can help reduce the sense of worry that your savings will run out.
Set aside a cash reserve for emergencies
Emergency funds aren't just for your working years – you will still need a cash reserve once you retire to cover unexpected expenses such as healthcare costs or home repairs. If an emergency arises, you don't want to have to sell securities at a bad time to access your money. To help prevent this problem, maintain readily-accessible funds in a savings account. As a general guideline, retirees should try to set aside at least a year's worth of expenses for emergencies.
Enjoy spending your savings
A fulfilling retirement is about more than just accumulating wealth; it's about having more time and freedom for the activities and experiences that bring you joy. But far too often, retirees are so afraid of overspending that they miss out on enjoying their retirement years to the fullest. Don't worry so much about your retirement savings that you deny yourself the pleasure of spending it. Creating and following a disciplined spending plan will help you to live a more comfortable retirement without the fear of spending too much.
Remember, retirement planning doesn't end once you reach your retirement date! With adequate planning and preparation, you can spend wisely and enjoy this new chapter of life with less stress.
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