Saving enough money for the retirement of your dreams is challenging enough. Wealth expert D. Paterson Cope says that turning that wealth you’ve accumulated into income, though, can be even more challenging.
Transitioning out of working life and into retirement can be difficult for some people. No matter who you are, this transition requires smart planning in advance.
Below are five areas you should focus on as you moving from the saving stage into the spending stage of your retirement.
1. Time the Big Decisions Well
Just about every retiree will have big decisions to make that will have a profound impact on how their retirement goes. This includes deciding when to retire, whether to stop working fully or transition to part-time, when you should start collecting Social Security and where you should retire.
All of these decisions are hugely impactful on your transition from work to retirement. Throw multiple scenarios against the wall and figure out which one works for you. For instance, delaying when you start receiving Social Security could add up to $100,000 to your overall retirement income, depending on different factors.
2. Don’t Ignore Income Altogether
When you retire, you may not want to report to an office five days a week, but have you considered sources of passive income? If you’re able to earn money without putting in too much effort, you can help to fund your retirement for longer, or fund a more luxurious retirement.
Investing in real estate is one of the most popular forms of passive income for retirees, and it can be one of the most profitable, too.
3. Balance Your Portfolio
In your early years of saving for retirement, you had the luxury of time on your side. This allowed you to at least consider investing in riskier assets that had a chance for bigger returns.
As you approach retirement and transition into it, it’s important to balance your portfolio to reflect your current status. This typically means shifting your savings investments into lower-risk assets. While you’ll likely sacrifice returns this way, you also will be reducing the risk that you lose the money with a downturn in the market.
4. Adjust Your Budget
Likewise, the budget you operated on during your working years needs to be re-assed and re-worked for retirement. It’s important that you start building this retirement budget in advance of you actually retiring. Doing so will help you see a clear picture of what your retirement looks like and whether you have to make any adjustments based on expenses or income.
Make sure you’re adding line items for extra health-care costs, and budget in any extra expenses related to travel, projects or hobbies you plan to take up.
5. Figure Out How to Stay Connected
It can be easy when you’re planning your retirement to be hyper-focused on yourself. After all, your retirement is extremely personal.
But, D. Paterson Cope says it’s important for all people transitioning into retirement to pay extra attention to their family members and friends. Do you plan on living close to them? If you plan to live far away, make sure you have a big enough budget for extra travel expenses.
Staying connected with the people you love is important in retirement. So, integrating your family and friends into your transition plan will help you live a happier life after work.
About D. Paterson Cope
D. Paterson Cope, CFP® is the founder and CEO of Cope Private Wealth, a financial planning and wealth management firm specializing in assisting retirees and people who are about to retire. D. Paterson Cope has been providing financial advice for more than 30 years. He first earned the designation of Certified Financial Planner (CFP) in 1997. When he isn’t working, he enjoys spending time with his wife, Jennifer Miree Cope, and the rest of his family in Mountain Brook.
