13 Money Management Tips for Retirees

Retirement is the perfect time to kick back and relax, but that doesn’t mean you should stop taking care of your finances. We’ve compiled a few useful money management tips for retirees to make sure your retirement stays as stress free as possible.


1. Spend less than you make, even in retirement.


Enjoy retirement, travel, go to the symphony, visit friends and relatives, but everyone has a limited amount of income. Don’t endanger your retirement by depleting your savings through excessive spending.


2. Maintain a healthy emergency fund for retirement.


Unfortunate things will continue to happen in retirement. Your washer or dryer might go out, or the furnace might break down in January. Be prepared with at least three to six months of living expenses in reserve that you can quickly get to, such as an FDIC insured checking account.


3. Only take Social Security when you need it or at age 70, whichever occurs first.


Even though you can begin withdrawing from Social Security at age 62, your monthly benefit will increase approximately 8% per year if you can wait. After age 70, the increases stop, so don’t wait past 70 to collect your benefits. Because of the nearly 8% increase per year in social security benefits after age 62, for those with a full retirement age of 66, the amount you can receive at age 70 is 76% higher than the amount you are eligible for at age 62.


4. Do your Medicare research.


Prior to turning 65, attend a free seminar to learn all about the many decisions that need to be made when signing up for Medicare. In Indiana, Ohio, and Kentucky, contact Medicare Simplified.


5. Make sure your investment portfolio is diversified.


You should put no more than 4% in any one stock and no more than 15% in any one mutual fund. A fiduciary can help you make sure your portfolio is well diversified.


6. Investment costs are important – they reduce your portfolio’s returns.


Be sure you know how much your investment costs you per year and how much your advisor costs you per year.


Because stockbrokers are paid per trade or by commission, working with a stockbroker as a financial advisor can be costly. A fiduciary, on the other hand, is paid a percentage of your total assets under management. This means a fiduciary only makes money if you make money.


What’s the difference between a fiduciary and a stockbroker?  


You want to get the most out of your investment, so be sure that you understand your investment costs.  


7. Don’t withdraw too much of your investment funds in retirement.


If you’re withdrawing funds from your investments for living expenses, do not withdraw more than 4% of your total portfolio per year, or you risk depleting your assets sooner than you planned.


8. Pay off all debt before retirement.


Getting your debt settled is one of the most important money management tips for retirees. An investor cannot build wealth by borrowing. If you do not have a competitive interest rate on your mortgage, refinance it before you retire. If possible, pay off your home mortgage before retirement.


9. Minimize taxes.


Minimize taxes by keeping mostly stocks in your taxable accounts and mostly bonds and real estate investments in your tax-sheltered accounts, like IRAs.


10. Utilize qualified dividends.


If you are receiving dividends in your taxable investment account, make sure they are qualified dividends and not ordinary dividends. Qualified dividends are taxed at only 15%, while ordinary dividends are taxed at higher income tax rates.


11. Don’t move all of your investments to certificates of deposits.  


If you retire at 65, don’t move all your investments to certificates of deposit (CDs) and bonds.  What if you live 30 more years? CDs and bonds will not protect you from inflation. A new Chevy today at $30,000 will cost you $50,000 after 26 years with only 2% inflation.


12. Have a durable power of attorney when you retire.


Almost everyone over 18 years old needs a will and a durable power of attorney, a document that appoints a person or organization to manage your affairs if you are not able to do so yourself. Almost everyone with a home or significant financial assets needs a revocable living trust to avoid probate.


13. Determine a retirement health care plan of action.


Everyone over 18 needs a health care power of attorney, a living will (also called a health care directive) and a HIPAA waiver.

We hope these money management tips for retirees are helping you feel a little more prepared for your financial future. If you’d like more retirement tips, download “Saving for Retirement? Five Tips to Make Sure You’re on the Right Track.”  

Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.