3 Actions That Will Improve Your Retirement
Retirement is a major accomplishment. But you also have to decide what to do next. While the newfound freedom is exhilarating, many people don't know what to do with themselves in retirement.
In many ways, retirement is like starting a new job. But your job is now to manage your wealth, enjoy your lifestyle and make this chapter of life one of the most meaningful yet. Here are some actions you should take to improve your retirement, whether you're newly retired or have been retired for some time.
[See: 10 Painless Ways to Save More for Retirement.]
1. Optimize your investments. The need for investment management doesn't end upon retirement. In many ways, it's a new beginning. If you worked closely with a financial advisor during your working years to save for retirement, continue to work with one going forward.
There are two big changes that occur in regard to investment portfolios upon retirement. Contributions normally stop because many retirees don't have any income to contribute anymore, and withdrawals from the retirement account begin in order to replace employment income. In can be difficult to watch your retirement account balance go down each year, but this is why you saved for retirement in the first place: to support yourself without having to earn an income.
However, you might need to adjust your investment strategy. You may want to lower your investment risk as you transition into retirement. This could mean shifting to a portfolio made mostly up of bonds, or even getting out of traditional investing altogether and purchasing an immediate annuity. There's no one-size-fits-all approach to optimizing your investments. The best approach is determined by sitting down with a financial advisor who can analyze your situation and present appropriate options for your consideration as a part of your money management strategy.
2. Optimize your lifestyle. Your investments are just one part of the retirement equation. The other part has to do with lifestyle. If you have been working hard all your life and you retired with a huge sigh of relief, you might be tempted to inflate your lifestyle in the form of new vehicles, a vacation home or some other luxury. Your financial advisor should know about any large expenses you are planning on purchasing so he or she can warn you ahead of time if it appears you can't afford to withdraw such large amounts of money from your investment accounts.
[See: 9 Retirement Planning Deadlines You Shouldn't Overlook.]
With all of this newfound time on your hands, it can be easy to overspend. Instead, consider living a modest lifestyle. You might downsize your home and find less expensive hobbies. Consider eating better food and less snack and convenience foods. There's something about living modestly that's appealing to many people. Try it out and see if it improves your retirement. As a benefit, you will save money and be able to live within your means.
3. Show family members how to get the most out of their finances. Teaching others is extremely rewarding. If you have family members who are struggling with their finances and you've done well with yours, see if they'd be open to your help.
You don't necessarily have to give them money, but show them how to manage it and improve their situation. Many young people struggle with simple money decisions, and if parents and grandparents took some time to educate them, many financial mistakes could be avoided. For example, showing a young person how to set up a simple budget can set them up for financial success. Another example could be highlighting the need for life insurance. Perhaps they haven't started a retirement account yet and would benefit from learning about the Roth IRA. Or maybe you could show them how to track finances.
Remember, the best retirement is one lived for others. Sometimes people don't want advice, but when they do, be there for them. Having been there and done that, you have a tremendous amount of wisdom that's very valuable to younger folks. The smart ones will listen to you.
[See: 10 Ways to Repair Your Retirement Finances.]
By maintaining your investment balance as much as possible and seeking out ways to save on expenses, you can have a much better retirement. But remember, serving the people around you is the best way to discover a fulfilling retirement. Retirement isn't always easy, but one that's lived with care can be tremendously rewarding for you and your family.
Jeff Rose is a certified financial planner, U.S. combat veteran and the founder of GoodFinancialCents.com.
