8 Ways To Avoid Financial Regret in Retirement
The last thing that most retirees want to focus on while they’re enjoying their golden years is financial management. But running out of money is actually the #1 fear of many retirees.
$1 Million or $5,000 a Month in Retirement: Which Would You Choose?
Learn: 3 Ways To Recession-Proof Your Retirement
One of the ways to contain this fear is to build up a sizable nest egg during your working years. But even with a solid portfolio in place, you’ll have to keep on your toes to make sure you don’t drain your account halfway through your retirement.
Here are the top ways that you can steer clear of financial regret and enjoy your retirement.
Stay Within Your Budget
Spending less than you earn is important while you are still working, but after you retire, it’s critical.
As you’re likely living off a fixed income in retirement, any debt you create by spending in excess of your budget will likely be near-to-impossible to pay off. In addition to finding the money to pay off the debt itself, you’ll have to battle double-digit interest rates, which can drive you further into the hole.
Sticking to your budget and staying out of debt can stave off this type of financial disaster.
Have Adequate Insurance
Many Americans think they won’t need insurance after they retire, as Medicare kicks in at age 65.
But the reality is that Medicare doesn’t usually cover all of a retiree’s medical costs. In fact, Medicare Part A, which is free to most Americans, only provides coverage for inpatient care at a hospital, hospice care, nursing home care, skilled nursing facility care and home health care.
Other costs, such as prescription drugs or doctor bills, require either outside insurance, Medicare Parts B and D, or some combination thereof. It’s best to prepare for these potential expenses long before you retire if you’re looking to protect your nest egg.
Discover: 10 Things Boomers Should Consider Selling in Retirement
Plan for Financial Surprises
Most financial advisors suggest that workers sock away at least three to six months’ worth of expenses in an emergency fund. But the risk of a financial emergency doesn’t go away once you retire.
In fact, a financial surprise like a car repair or uninsured medical emergency could be even more damaging in retirement, as your income is likely to be flat compared with the rising income you may have enjoyed during your working career.
Don’t Give Too Much Away
For many retirees, it’s a natural tendency to become more charitable, especially with family. But some give so much away that they sacrifice their own quality of life.
While you should feel free to be as generous with your loved ones as you want, understand that you’ll have to make corresponding cuts to your own day-to-day expenditures to avoid taking on debt.
Keep an Eye on Social Security Cuts
According to the latest projections from the Social Security trustees, retirement benefits may be cut by 20% or more in as little as a decade.
While this estimate changes from year to year — and it’s likely that legislators will step in and make some type of accommodation — it’s worth keeping your eye on developments if you’re a retiree living on a fixed income.
The closer the day approaches, you may want to start trimming your budget so that any reductions are already factored into your cost of living.
Continue To Invest for Growth
Once you retire, you’re likely going to want to switch some of your growth investments to income-generating ones. However, it’s usually a mistake to completely avoid investing for growth once you retire.
Depending on your general health and when you stop working, you may spend 30 years or more in retirement. If you want to protect the value of your portfolio against inflation over that long a period of time, you’ll need some stocks or other growth investments. Otherwise, the value of your nest egg in real dollars will drop over time.
If you buy $50,000 in bonds today, for example, the $50,000 you receive back when they mature will be worth less due to the effects of inflation. The same is true of the fixed income payments you receive from the bonds.
Avoid Financial Services Fees
Fees for banking or investment accounts directly reduce the amount of money you keep in your pocket. If you’re living off a fixed income and/or a limited nest egg, you should go out of your way to limit your fees as much as possible.
The good news is that nowadays, most brokerages offer commission-free trading for stocks, bonds, ETFs and more. Similarly, most banks offer ways to get savings and/or checking accounts free of charge, along with free or fee-rebated ATM transactions.
If your bank or brokerage is charging you these types of fees, shop around for other options.
Consider Downsizing or Relocating
By the time you retire, it’s entirely possible that you may be living in too large of a home.
If your kids have moved away and you are living alone or just with your spouse, for example, you may no longer need a five-bedroom house. Moving to a one- or two-bedroom home could save you on your rent or mortgage, and it will also save you on things like maintenance and utility costs.
By cutting your expenses this way, it will have the same effect as if you were earning more money, which isn’t always an easy thing to do once you stop working.
A similar option is to move from a high-cost state or area to a lower-cost one. If you worked your whole life in California but have no family or other ties there, for example, moving to a lower-cost state like Texas or Alabama when you retire could significantly reduce your costs.
This could directly translate into a higher quality of life or give you a bigger cushion against any potential financial missteps or emergencies, all without having to earn a higher income.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 8 Ways To Avoid Financial Regret in Retirement
