On the day you retire your life changes.
How You Invest When You Retire
On the day you retire, you should still have money invested for the long term. Moving all of your money out of stocks and into bonds and bank accounts is an overly cautious approach that increases the likelihood that you won’t be able to afford your lifestyle as long as you’d like.
You want to balance a portfolio that has a moderate amount of volatility and risk with one that has a good chance of keeping up with inflation.
How You Spend When You Retire
On the day that you retire, you’re still looking ahead at major purchases as well as everyday expenses. You can expect to have to pay for meals, utilities, property taxes, homeowners insurance or rent.
Not all of your expenses will be handled with a fixed monthly draw from your investments. You’ll probably buy a couple of cars after you retire, and buy gifts during the Holidays for your friends and family. Maybe you’ll want to take a celebratory trip. Oh, and major, and often unexpected, appliance repairs and replacements, and home maintenance, won’t go away at retirement. That means you should have some money coming to you automatically every month for regular bills, but you should also have separate funds set aside for bigger, incidental expenses.
On the day that you retire, you’ll want to spend a lot of money. You’ll want to run out and buy closet organizers and airline tickets and hobby supplies like paint brushes or power tools. You’ll want to buy new athletic clothes and leisure wear. Golf clubs or skis. The first year of “retirement” is often the most expensive, experts say. So, prepare a separate first-year fund so you can invest in the kind of retirement you want.
How You Manage Your Income Stream When You Retire
On the day that you retire, you may not want to be collecting Social Security. Deferring Social Security benefits may substantially increase your monthly benefit when you decide to start drawing on that income source. If you have substantial savings in 401(k) plans, IRAs and other accounts, you may want to live off of your savings for a while and skip the Social Security checks. Especially if you are under the age when your Social Security benefits are reduced when you earn income and you are planning to continue working in some capacity. There may also be tax advantages for starting to take money out of tax-advantaged accounts earlier.
How You Manage Health Care When You Retire
On the day that you retire, you should be more worried about today’s health care than the long-term care you may need down the road. If you retire before the Medicare-eligible age, you may have to line up your own health insurance. Keep your company plan in force (through COBRA coverage) until you line up your next plan.
Related Activities and Side Trips
- At Age 65: Claiming Government Health-Care Coverage
- Early Retirement – Health Care Coverage
- Health Care Costs in Retirement
- How to Buy Health Care Insurance
- Low Premium For Your Health Care?
- On or After Age 55: Prepare for Retirement
- Retirement Planning – Steps for Pre-Retirees
- Retirement Savings, Needs and Planning
