A few days ago, I saw a post on one of the social media platforms that read, “30 is the new 50.” And that’s the truth. People are living longer and thriving well into their ‘80s. Many who turn 65 are no longer having a hard break, like before. Instead, these people are transitioning to another phase of life, with expended experience and a renewed sense of purpose.
This phenomenon has given retirement a whole new meaning. But to prepare for the transition to the retirement phase, you need an improved understanding of your finances.
One major concern of people transitioning is to ensure they don’t run out of money. Those who have diligently saved to their retirement accounts and lived within their means often have little to worry about in this regard. The steps you take can make or break your financial security as you retire.
The first mistake most people make is focusing too much on making money instead of spending money (burn rate). At the same time, it’s important to change how you spend money during retirement. The process may not be as it seems. It’s challenging to go from spending a specific amount you are accustomed to and tracking every penny you spend. Not being able to stick to your spending plan in retirement will put pressure on your resources and sense of independence.
To ease this pressure, you should make these lifestyle and spending adjustments before entering the retirement phase. It would be best to shift your thinking from being a conscious saver to become a conscious spender. The transition will become easier once you get a hold of where you spend your money.
Another way to avoid running out of money is to look at where your money is invested. If most of your money is invested in the stock market, you may have to be drawn into monitoring the market volatility to know your investment position. This can increase stress and anxiety while preventing you from enjoying the thing you like.
When withdrawing money as income during retirement, you typically do this every month. But when the market experiences a downturn and you make the same withdrawal, you are eating into your investment value. When you sell when your investment value is down, you eliminate the money that should earn you more money. Therefore, it becomes extremely difficult to make up for the difference. Hence, you can run out of money much faster than expected.
An important aspect of your financial planning should be to ensure you have a diversified and balanced portfolio, such that even when the market fluctuates, you’ll have other assets to draw money from. With this, you will be able to give your stock investments the time it requires to stabilize.
Consider Your Values
Finally, as you move to the retirement stage, you need to consider more than money. You must consider what your legacy would be. How do you ensure your family is taken care of? Do you want to leave money behind for any charity, organization or cause? Do you want to spend your later years making a difference? This may be by volunteering, coaching or picking up a new hobby.
When thinking about your legacy, it’s important to consider your values, as they determine your priority and the standard upon which you measure how your life is developing. Your values should be the foundation upon which you develop your goals and actions.
When your actions and behavior reflect your values, you will experience a sense of satisfaction and contentment. As you draw closer to the transition phase, thinking about money’s true purpose is a great way to start.
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Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.
