Protect Your Financial Security in Retirement
Keep six to twelve months of living expenses available - While you will want to invest most of your retirement savings, it is also smart to set aside six to twelve months of living expenses in an easy-to-access account which pays you some interest. This money does not need to cover all your living expenses, since presumably a portion of what you live on will be covered by your Social Security benefits and/or any fixed pension you may have. However, if you need additional funds each month in order to live, you want to set enough aside money so you will not need to sell stocks or bonds when the prices are low. Having this money set aside will also give you peace of mind as you go through the ups and downs of your later years. It is important to remember that this money is specifically earmarked for living expenses. You don't want to start spending it on travel or other expenses you may have.
Set additional money aside for planned expenses - Many financial advisors recommend that you set aside 1 to 2 percent of the value of your home every year to pay for future maintenance and repairs. If there are other expenses you expect in the years after retirement, such as buying a new car, travel, or a potential homeowner's association assessment, you may want to set that money aside at the start of your retirement, too, so you are not caught by surprise.
Create a realistic retirement budget - How much money will you need to meet your basic expenses during retirement? Make sure you do not forget to budget for the taxes you may have to pay on IRA withdrawals. Then, determine whether you have saved enough money to cover those expenses for 25 to 30 years after you stop working. If your savings will not last at your current level of spending, cut your expenses immediately at the start of your retirement. Do not wait until you are in a desperate situation and then try to cut back.
Meet with your insurance broker - Do you have enough life insurance to cover your funeral expenses and make up for the loss of family income in the event you die before your spouse? Should you get long-term-care insurance to pay for assisted living or a nursing home for the last few years of your life? You do not want to over-insure your life during retirement, since you are probably not supporting children. However, a small amount of life insurance could help provide financial security to you and your spouse.
Meet with a financial planner to decide how your savings should be invested - How much of your money should be in stocks and how much in bonds? How will you diversify? Will you follow Warren Buffet's advice to retirees and put your savings in a variety of index funds? Once your money is invested, do not simply forget about it and assume everything will stay the same. Meet with your financial planner at least annually and evaluate each holding you have to determine if it is still generating the growth and/or income you expect. Re-balance your portfolio periodically. Strive to live within your means and follow the general financial plan you set up when you first retired.
Do not become a victim of a scam - Sadly, many senior citizens fall for scams in their attempts to get an unusually high return on their money. Often, this causes them to lose all or most of the money they have saved over a lifetime. Remember: If it sounds too good to be true, it probably is. Stick with reputable companies and well-known investments.
Read up on retirement planning - It is always a good idea to study different retirement planning programs and choose the one which you think will work best for you. For example, you may want to occasionally read popular books on financial planning for retirement.
If you follow these suggestions, you may not be able to avoid every possible financial disaster, but you will have substantially lowered your risk of running out of money during your lifetime. In fact, you may even have some money and other assets left over to leave your loved ones. You will also be able to sleep better and be more relaxed when you know you have planned your retirement well.
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