10 Financial Tips for Soon-to-Be and New Retirees

For many older adults, retirement is now the “not-so-golden” years. A disruptive economy derailed retirement plans, from cancelling retirement goals and late-career joblessness, to diminishing account balances and personal financial fragility. It’s been an unsettling time. But there are steps you can take to help and protect your financial situation, while raising your morale as well.

1. Create a Retirement Budget

Retirement is a major life transition, which is why your budget will need an overhaul to account for a different lifestyle and new streams of income. You’ll want to follow the same steps for creating a budget, like listing your reoccurring monthly payments and fixed and flexible expenses. Then, you’ll have to make adjustments, such as tapping into your nest egg without overspending, possibly postponing retirement dreams like traveling, and preparing for rising medical and health care costs that inevitably come with aging.

2. Don’t Underestimate Your Spending

Some retirees may miscalculate their spending during their golden years, assuming they’ll have more cash to spare. You still have to account for expenditures like a mortgage, house upkeep and vehicle maintenance. Carolyn McClanaha, a certified financial planner, breaks down retirement into three stages: the go-go, the slow-go and the no-go years. Funds will fluctuate throughout these years, and to ensure you can meet your needs, it’s better to overestimate how much you’ll need.

3. Chip Away at Debt

Still carrying financial baggage into retirement? You’re not alone. The Survey of Consumer Finances found that at one point, the percentage of households with an adult who’s 65 or older was 60%, and the median total debt was $31,300. Try not to dismiss any debt, and look into your options like refinancing, consolidation, downsizing and making it a priority to pay off balances, starting with those that have the highest interest rate.

4. Consider a HELOC for Additional Funds

The equity in your home can be a resource for accessing some extra cash for home renovations, a hefty medical bill or other unexpected retirement expenses. A Home Equity Line of Credit (HELOC) gives you an open line of credit (similar to a credit card) that you can tap into, along with interest rates that are typically lower. During the draw period, you borrow from the HELOC in increments or one lump sum, while making payments on the interest and balance.

5. Downsize Your Home

Speaking of home renovations or repairs — it may be time to downsize to a home that’s easy to care for and meets your needs. Financially, you can profit off the sale, lower your mortgage payments, and reduce other home ownership-related costs like utilities and maintenance.

Moving into a new home can also be adventurous. Is it finally the right time to move to a quiet, slower paced neighborhood? Have you always wanted to travel in an RV? Without responsibilities like raising children or a job, you can move and live out your retirement dreams.

6. Reduce Your Taxes

Let’s say that you do downsize; the IRS typically allows you to make money on the sale of your house tax-free. The tax deduction includes an exclusion of up to $250,000 of capital gains (single) and $500,000 (married/filed jointly). NerdWallet also lists these potential ways you may possibly be able to lower your taxes after turning 65: a higher standard deduction, an extra $1,000 contribution per year to your traditional or Roth IRA, deductions for unreimbursed medical expenses up to a certain amount, and up to $7,500 in tax credit if you have a disability and qualify.1

7. Don’t Shy Away from Stocks

Now that retirees are living longer, you could expect a 30+ year retirement, which presents a great financial risk: inflation. Low-risk investments, such as bonds, can take a hit by inflation over a long period of time. Consider moving some of your retirement investments to stocks to help you stay ahead of inflation; “broad-based, low-cost funds” may be your best option in the stock market, and investing 10–30% of your retirement money is considered lower risk.

8. Understand How Medicare Works

An unfortunate side effect of these lifelong anticipated golden years is declining health and out-of-pocket health care costs. This means you’ll want to maximize your Medicare coverage. Make sure to review your options, work with a professional to choose the right plan and enroll prior to turning 65. Your research can begin by visiting Medicare.gov and reading about how to cut through the Medicare mayhem.

Medicare can be confusing and overwhelming. If you’re in need of assistance, contact one of our Senior Insurance Advisors!

9. Reclaim Your Retirement

During a time when the world got turned upside down by a pandemic, retirement also got upended for many retirees. The risk of traveling, confinement, financial hardship and sacrifices have paused or canceled retirement dreams. You may experience feelings of resentment and grief, but the situation doesn’t have to tarnish the golden years. Connect with other retirees, look for virtual volunteer opportunities, revive an old hobby, declutter and relive old memories, or take fun fitness classes online!

10. Delay Social Security If You Can

You can take social security starting at age 62, but if you can afford to wait to collect past your full retirement age or until age 70, your payout will increase. Start your benefits after your full retirement age, and you receive a delayed retirement credit (DRC), which means the benefits increase by a percentage for each delayed month, according to the SSA. The longer you wait, the higher your income. Consider your health and life expectancy. Do you have many years ahead of you? You may want to pause on Social Security and wait for those larger checks.

If your financial stability and spirits were affected by the economy, we strongly recommend that you review these tips with an advisor who can also guide you through your financial situation.

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The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.