1) Get a financial plan or “retirement income plan”
Yes, I know that’s like the barber telling you that you need a haircut, but the peace of mind a lifetime retirement income plan can give a person or couple makes this number one on my list of resolutions.
As a retiree, you need to rely on your assets and income streams like Social Security benefits or pension income to make sure you always have money to fund the lifestyle you are accustomed to living. This requires a delicate balance, spend too much and you outlive your money, spend too little and end up the richest person in the graveyard.
This is made even more complicated by inflation causing the dollar cost of doing the same things to double or triple over a typical retirement. You need an explicit plan to address that increasing cost of living to ensure you don’t have to cut back your lifestyle in the future.
2) Make sure you have an up-to-date estate plan
When is the last time you updated your estate planning documents? If you’re like most people, it’s been a while. Estate planning is crucial, but it’s often overlooked or put on the back burner.
Review your will, and if you don’t have one, get one as soon as possible. If you need more control over how assets will be managed and distributed, you can consider different types of trusts. You will also want to make sure to check the beneficiaries on any accounts and make sure they still align with your wishes.
Fortunately, most estate planning is relatively simple and working with an estate planning attorney makes this process relatively easy and affordable. Just tell them what you want to happen if you become incapacitated or die and they’ll draft the necessary documents.
3) Pick up a new activity
As a retiree you probably have more time than ever before to fill. Without a plan for how you will spend it, hours can be wasted trying to figure out what to do with yourself.
As I’ve written in a past blog about your “Retirement MBA” – many people experience a lull in excitement or feelings of emptiness in the early stages of retirement as they no longer feel the sense of mastery or belonging like they did at their job.
Picking up a hobby you want to master or an activity you can do to engage with people socially are great ideas for replacing the void that can be felt after someone stops working. Volunteering for a cause you are passionate about, working part time, or just trying something new, are all things to consider with your newfound time that can ultimately lead to a happier, more fulfilling retirement.
4) Think about Roth conversions in low-income years
If you find yourself in a low tax bracket, it may make sense to transfer money from your tax-deferred accounts (Traditional IRA’s and 401k’s) to a Roth IRA. When you do this, you’ll owe taxes on the amount you transfer, and once the money is in your Roth IRA, it grows tax-free. This can make sense if your current tax bracket is lower than your expected future tax bracket.
This is especially common in the early years of retirement for people who have a substantial amount of money outside of retirement accounts.
Of course, you should always consult a CPA before implementing any tax planning strategy to ensure it makes sense for your specific situation.
If you have more money than you need, consider giving some of it away while you’re still around to see the positive impact it has. As the saying goes, “it’s better to give with a warm hand than a cold one.”
I’ve witnessed this firsthand in my career as an advisor. Many of my client’s greatest joy is giving to loved ones or charity.
6) Prioritize your health
I take my health pretty seriously, so people who know me won’t be surprised to see this one on the list.
Though it is nice to be in shape when you are younger, how you take care of yourself has an even bigger impact in your later years, as it will help you maintain your mobility and your independence. When you add in the money you can save in healthcare costs, it’s easy to see how “investing in your health” is one of the best investments you can make..
7) Stop Watching Financial News
So many of the concerns I hear about investing or the stock market from clients or friends are due to people reading some attention-grabbing headline. And to this day I can’t think of a time I’ve seen an attention-grabbing headline that made me think “wow this is really good investment advice.”
Financial media’s job isn’t to provide good advice, it is to grab your attention by creating headlines that play on your emotions. I think it is best to avoid it entirely. None of it is news you need to know or act on.
If you are a person that likes consuming new information and just love learning about investing, here are a couple of my favorite financial authors I’d suggest following (I do not have any affiliation with these people and don’t have any incentive to recommend their content):
Ben Carlson’s Blog A Wealth of Common Sense
Carl Richards Weekly Letters (you can subscribe on https://behaviorgap.com/)
Blog Posts by David Ruedi, CFP®, RICP®:
- The Ten Key Components of a Retirement Plan
- Should I Purchase Long-Term Care Insurance
- Concentrated Stock with Large Gains
- Do You Have Your Retirement MBA?
- The Psychology of Social Security Claiming
- What to Expect When You're Investing
- You Can't Rely on the 4% Rule
- Lump Sum vs. Annuity
- What Does a Financial Planner Do?
- Preparing for the Later Years of Retirement