Retirement is an exciting time if you’ve started saving early and invested consistently. More Baby Boomers retired in 2020 compared to previous years due to the pandemic, making the transition from saving to spending a topic of discussion. If you’ve been wondering how to switch your mindset to fulfill your retirement dreams without splurging unnecessarily, read on. In this article, Matthew Brassard, a Medicare expert from Rhode Island, shares his tips on changing your focus from saving to spending without hurting your assets.
Retirement Spending Plan
Many retirees believe that their spending is not going to change once they retire. Unfortunately, such thinking can lead to running out of retirement savings too soon. Instead, create a detailed retirement spending plan. Allow a little wiggle room since your expenses will change over time. Medicare is one of the items that you should add to your retirement spending plan. Research shows that two 65-year-olds need about $295,000 for their medical expenses in retirement.
In addition to Medicare, your retirement spending plan should incorporate the following essential expenses:
- Utilities, such as gas, electricity, and water;
Your optional spendings may include:
- Education and subscriptions;
- Travel and dining out;
- Donations and gifts.
Ensure that you have a separate fund for one-time expenses such as occasional repairs, weddings, and graduations of your grandchildren. Set money aside for state, federal, local income taxes, and property taxes if you own a home. Accounting for all of your spending categories will help you have a realistic view of your financial health.
Retirement Income Sources
Your income during retirement may vary just as much as your spending, so it’s vital to prepare accordingly. Not many retirees solely rely on Social Security benefits during their retirement, but it’s essential to claim your benefits when the time comes. Don’t wait for too long, though, because the difference between claiming Social Security benefits early versus waiting out can be as much as $100,000. It is important to remember that if you are married, you and your spouse’s Social Security benefits may not start simultaneously, so write down the dates when you are eligible.
It’s also important to note that once you approach 70 and a half, you will be required to withdraw minimum distributions from your 401(k) and IRA accounts. You may decide to pick up a part-time job to socialize more or even start a business at some point in your retirement. All of this can create fluctuations in your retirement income.
A great way to stay on track with your spending during your retirement is to pay yourself a paycheck out of your savings. This paycheck should cover all of your retirement expenses. This way, you won’t have the temptation of spending an unlimited amount of money in a given month.
Utilizing multiple accounts for different purposes can also help with organization and budgeting. Keep all of your retirement spendings in a separate account other than where you keep your investments and pay all of your bills from this account. You should also have an account specifically for emergencies. Some people prefer to keep enough in their accounts to cover their yearly expenses.
No matter what you choose to do with your retirement savings, make sure that you have a solid plan in place that supports your retirement goals. At the end of the day, you’ve done a lot of hard work to get here – so enjoy the fruits of your labor!
About Matthew Bussard
Matthew Bussard is a financial services broker offering support to Medicare users in Rhode Island. He is passionate about creating a difference in his clients’ lives by helping them enroll in Medicare with professionalism and care. Mr. Bussard volunteers with Medicare recipients at clinics, providing efficient, continual guidance to clients every step of the way. Matthew also participates in various charitable activities, including The Hunger Project, the MDRT Foundation, local clean-ups, and little league coaching. He donates to local charities and makes a difference in his community in every way possible.
Fergus Murray is the lead editor for Business News Ledger. Fergus has been working as a freelance journalist for nearly a decade having published stories in the New York Times, The Plain Dealer, The Daily Mail and many others. Fergus is based in Detroit and covers issues affecting his city and New York State. When he is not busy writing, Fergus enjoys jogging.