Just Retired? These Money Management Tips May Help

Just Retired? These Money Management Tips May Help

Retirement can be its own reward: a time of gratification, relief and joy. You’ve worked hard for this day and deserve to bask in the moment, having time to yourself to do the things you may have been putting off due to the demands of your job. Travel, hobbies, family time — your priorities take priority now!

As you set out to begin this fresh new chapter of your life, it’s important to have the peace of mind that your finances are in good shape. Transitioning from a regular paycheck to reliance on Social Security and savings may take some getting used to. The following tips are designed to help make that transition easier and help you make the most of your money in retirement.

Update your budget

It’s important to have a good understanding of the money that will be coming in and going out during your retirement years. There will be differences in your spending — the elimination of job-related expenses such as clothing, commuting, morning coffees or lunches out, and the addition of travel or other expenses related to your retirement plans.

Update your monthly budget to include the bills that will remain steady — housing, utilities, groceries and insurance premiums, for example — as well as any additions or reductions you anticipate. Having a solid grasp of how much money you need to meet your monthly goals enables you to turn your attention to your income options.

Know your income options

Your retirement income can come from a number of sources, including Social Security and any pensions, 401(k) and IRA accounts, and other savings and investment accounts you may have. When and how you take withdrawals from these accounts can have an impact on your tax liability and long-term financial stability, so you may want to consult your tax or financial advisor to ensure you’re making the right decisions for your specific circumstances.

One of the considerations you can make is when to begin collecting on your Social Security benefits. While qualified individuals can start receiving retirement benefits as early as age 62, full benefits aren’t available until you reach your full retirement age, currently age 66 or 67, depending on when you were born. If you wait until you’re 70 to begin taking benefits, your benefit amount will be even higher.

Some retirees choose to get a job in retirement to keep income flowing. If you are considering working while receiving Social Security payments, be aware there are limits to how much you can make while continuing to receive your full benefit amount. In 2024, that limit is $22,320 if you are under full retirement age and $59,520 if you have reached full retirement age. If you exceed the annual limit, the Social Security Administration reduces your benefit using a mathematical formula.

Understanding all the income options available to you in retirement can help you make informed decisions that pay off for you today and tomorrow.

Make sure your money is working for you

In retirement, as in any other phase of your life, saving money is important. Saving can empower you to take a wonderful trip, make a large purchase, attend a special event, boost your emergency fund — you name it. Make saving a line item in your budget and consider automating monthly deposits from your Social Security or retirement distributions to your interest-bearing savings account(s) so that you are making a return on the money you save. Certificates of deposit (CDs) may help you earn even more, if you don’t anticipate needing to tap the funds in your account for several months.

If you have investments, this is also a good time to sit down with your financial advisor to discuss what changes to your portfolio make the most sense as you move into retirement. (If you find that a rollover IRA can help you reach your goals, Dollar Bank offers several options.) 

Plan for emergency and medical expenses

Just like when you were working, it’s important to have an emergency fund for unexpected expenses. A general rule of thumb is to keep three to six months’ worth of expenses set aside in this fund so that if a car or home repair, or some other expense comes up, it won’t take a bite out of your monthly budget. (Remember to replenish your fund each time you use it.)

Medical costs require savings in retirement as well. Medicare premiums, co-pays and other out-of-pocket medical costs can add up, especially as we age. Estimates of the medical costs typically incurred by individuals in retirement vary widely across sources, so ask your financial advisor what they recommend considering your health history and financial situation.

Adjust your budget, spending and savings as you go

Once you have a good budget and savings plan in place, track what you spend, stick with your budget and make adjustments as needed. Maybe you’ll find you can get by spending less than you had anticipated, and so you can put more into savings, for example, or you discover the opposite, that you need a little more cash each month and need to consider cutting back on discretionary spending or getting a part-time job. Wherever your path takes you, don’t get discouraged! You’ll find your ideal solution for living comfortably in this next stage of your life.