Retirement

6 Steps to Organizing Your Retirement Expenses

Allecia Vermillion
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After years of working, saving and paying bills, it’s time to prepare your finances for the next chapter—a happy retirement.

<p>The average life expectancy for American adults who retire at age 65 stretches 18&nbsp;years beyond retirement for men, and 20 years for women. If you are approaching&nbsp;your target retirement age, now is the time to get your finances in order.&nbsp;Whether your long-term goal is paying for your child&rsquo;s college tuition or taking&nbsp;a trip to Europe, the subtraction of a regular paycheck and the addition of Social&nbsp;Security can change the way you think about money. However, a savings plan&nbsp;enacted well in advance of retirement can help you feel confident in your financial&nbsp;situation and make the most of your retirement years. After all, you&rsquo;ve earned it.</p> <p>To get started, use this six-step guide.</p> <p>1. UNDERSTAND YOUR STAGE</p> <p>A solid retirement plan starts by understanding when and how you will want and&nbsp;need to spend your savings. Lauren Locker, a certified financial planner in Little&nbsp;Falls, N.J., and chairwoman of the board of the National Association of Personal&nbsp;Financial Advisors, says it helps to think of retirement in three stages: the go-go&nbsp;years, the slow-go years and the no-go years.</p> <p>The go-go years are the first years of retirement, which often provide an opportunity to be&nbsp;&ldquo;on the go&rdquo; and see places you may have waited years to see.&nbsp;&ldquo;You have time to go out and play, so you&rsquo;re often spending a lot more money&nbsp;than you would be if you were working,&rdquo; says Locker.</p> <p>After the &ldquo;retirement honeymoon,&rdquo; life may slow down a bit when you settle into&nbsp;the slow-go years. During this time (which could last many years) some people&nbsp;find that they want to do less and travel less, and spend more time prioritizing&nbsp;home and family.</p> <p>Finally, the no-go years, as Locker calls them, come into play if health care and&nbsp;assisted living costs come into play, claiming a bigger portion of retirement&nbsp;savings and income.</p> <p>While retirement is different for everyone, having a good idea of when you will need to&nbsp;dip into your savings and how much you will need during each stage can help you better anticipate how to pace your savings and develop a long-term vision for retirement.</p> <p>2. CREATE A PLAN OF ACTION</p> <p>Once you have a vision for what you will want to do in retirement and the anticipated pace of your spending, you can develop a more comprehensive plan. To get started:</p> <p>Take inventory. About six months before you expect to retire, make an appointment with your company&rsquo;s human resources department to review your retirement&nbsp;benefits, how and when you can access them, and what will happen to your health&nbsp;insurance. If you have a pension, find out how you will receive it. And to ensure&nbsp;you&rsquo;re not leaving any retirement money on the table, track down the same information from any past companies you&rsquo;ve worked for over the years.</p> <p>Confirm beneficiaries. Check all of your retirement accounts to make sure that&nbsp;any beneficiary information you have filled out is up to date. Locker says many of&nbsp;her clients who are remarried still have a first spouse designated as beneficiary, or&nbsp;now have grown children who should be listed.</p> <p>Rework your budget. The Social Security Administration uses the term &ldquo;threelegged financial stool&rdquo; to describe the typical sources of retirement income:</p> <p>Social Security, pensions and personal savings. When the first two aren&rsquo;t sufficient,</p> <p>a spending plan can help determine how much you can (or should) draw each&nbsp;month from the retirement money you&rsquo;ve put away over the years.</p> <p>With your retirement date in sight, update your budget, comparing expected sources&nbsp;of income with anticipated monthly expenses. Locker also recommends including&nbsp;irregular costs such as dental work, home maintenance, eyeglasses, vacations or big&nbsp;purchases like a new car, if necessary. This budgeting exercise is especially valuable&nbsp;because post-retirement income can be very different than what you&rsquo;re used to.</p> <p>3. WORK WITH FINANCIAL PLANNERS WHO&nbsp;UNDERSTAND SENIORS</p> <p>Ideally, you should start meeting with a financial planner at least a decade before&nbsp;retiring to calculate when you want to retire, how much you&rsquo;ll need to save and&nbsp;whether you&rsquo;re on track to meet that goal. If you&rsquo;re off target, that final decade&nbsp;is usually the best time to set aside extra money because many expenses may no&nbsp;longer be a factor. For example, children may be out on their own and no longer&nbsp;financially dependent on you, or your home may be paid off.</p> <p>If you missed the boat and didn&rsquo;t plan sufficiently before retirement, it&rsquo;s never&nbsp;too late to contact a financial planner and see where you can leverage retirement&nbsp;funds. Look for a certified financial planner who has experience working with&nbsp;seniors. These planners will be tuned into financial milestones (such as having to&nbsp;take minimum distributions on your IRA accounts when you turn 70.5 or the</p> <p>fact that you must sign up for Medicare Part A at 65, even if you&rsquo;re not using it),&nbsp;and they can help create a spending plan with your future in mind.&nbsp;Consider using fee-only financial planners who don&rsquo;t earn any of their money&nbsp;from commissions on the products they recommend. This could be especially if&nbsp;you&rsquo;re facing a financially sensitive period.</p> <p>4. EMBRACE TECHNOLOGY</p> <p>It can be tough to stay on top of financial changes. Perhaps the best place to access&nbsp;financial planning resources, as well as information on taxes and managing assets,&nbsp;is online. It also is easier to stick to a spending plan by setting up online payments,&nbsp;automatic transfers between your accounts and direct deposits via the Internet.&nbsp;Locker encourages all of her clients to get comfortable managing money on the&nbsp;computer. Logging on to bank or brokerage websites is an easy way to view balances, make payments and stay on top of your finances. And these institutions go&nbsp;to great lengths to ensure sensitive information is secure.</p> <p>Once you&rsquo;ve decided how much of your savings to pull from your retirement fund&nbsp;each month, Locker recommends arranging to receive that money as a monthly&nbsp;payment, rather than making random or irregular withdrawals. Major brokerages&nbsp;such as Charles Schwab, Fidelity and Vanguard can easily set this up. &ldquo;When you&rsquo;re&nbsp;used to getting a regular paycheck, you may find comfort in&nbsp;automatic payments that keep that steady flow coming in,&rdquo;&nbsp;Locker says.</p> <p>5. TAKE ADVANTAGE OF DISCOUNTS</p> <p>Once you&rsquo;ve set up your finances, take advantage of the&nbsp;many senior discounts to stretch your dollars as far as&nbsp;possible&mdash;after all, you&rsquo;ve earned them. Try searching&nbsp;SeniorDiscounts.com, an extensive directory of perks&nbsp;for people age 50 and older, suggests Jim Miller, whose&nbsp;syndicated &ldquo;Savvy Senior&rdquo; column runs in more than&nbsp;400 newspapers across the country. Many of the website&rsquo;s&nbsp;resources (including its newsletter) are free; a premium&nbsp;membership costs $13 per year and offers additional&nbsp;discounts for members only. Individuals age 50 and older&nbsp;can also sign up for an AARP membership card for $16&nbsp;per year. The card offers discounts on travel as well as other&nbsp;goods and services.</p> <p>6. THINK LONG TERM</p> <p>Don&rsquo;t forget about potential life changes as you prepare for&nbsp;retirement. Make sure you have advance directives (wills,&nbsp;powers of attorney and the like) in place for medical and&nbsp;financial emergencies. And work with your financial advisor to streamline your assets&mdash;consolidating multiple bank&nbsp;accounts and investments&mdash;so they are easier to look after,&nbsp;and easier for family members to manage if necessary.&nbsp;Also, plan ahead for your long-term living arrangements.</p> <p>If you think you&rsquo;ll downsize or move into a senior living&nbsp;community in the future, build that goal into your financial plan today. A financial planner or online housing calculator can help you determine the costs of senior housing, as well as potential medical costs and other expenses,&nbsp;so you can factor them into your long-term plan.</p> <p>RESOURCES</p> <p>Finding Financial Planners</p> <p>National Association of Personal Financial Advisors</p> <p>napfa.org</p> <p>Elderlife Financial Services</p> <p>elderlifefinancial.com</p> <p>American Institute of Financial Gerontology</p> <p>aifg.org</p> <p>Discounts for Seniors</p> <p>SeniorDiscounts.com&nbsp;</p> <p>seniordiscounts.com</p> <p>AARP Member Benefits&nbsp;</p> <p>aarp.org/benefits-discounts</p>

If you are approaching your target retirement age, now is the time to get your finances in order. The subtraction of a regular paycheck and the addition of Social Security can change the way you think about money. 

Use this guide to get on top of your financial situation and learn more about:

  • Ideas for drafting a financial plan
  • Advice for choosing the right financial adviser
  • Tips for cutting costs
Finance Retirement Guide
Publication Date: April 30, 2013