Retirement is an important and inevitable phase of life. As you don’t work anymore, your active income stops and it is the retirement savings you will be using to meet your needs. Once you enter the retirement phase you need to ensure the money you saved till then will be sufficient to meet the needs thereafter. When your savings are the only source of income during the retirement phase, going broke in such a phase will be the biggest fear and you must be extra careful with your budget planning.
Here are some tips and steps you can consider to avoid going broke during retirement.
Monitor Expenses
The first and foremost step you need to take once you enter your retirement phase would be monitoring your expenses regularly. Till the retirement phase, the retiree might have had different incoming and outgoing cash flow like daily work commute, utilities, food, etc. But during the retirement phase, as there is no employment the daily work commute will be removed also changes in utility bills, dining out and travel as well.
Reevaluate the budget and ensure your savings are put to the right use instead of unnecessary expenses. Check how much you have saved, make a monthly budget and spend only the budget assigned to the particular month. The retirement phase budget plan needs to be realistic.
Planning the budget for the retirement phase prior would be a wise decision as you can plan your savings or investments for the retirement fund properly. If you have a lump sum amount in your account then fix a withdrawal rate for your monthly expenses. Consider the average life expectancy and divide your amount per month accordingly. Fix a withdrawal rate like 3%-5% and stick to it.
Check: How does the 50-20-30 Budget rule work?
Have a backup plan
Usually, the source of income during retirement would be savings or investments. Having both sources would be the best plan for retirement. If you have your investments for retirement funds, then you can keep aside some money in the savings account as an emergency fund. Also, ensure you have diversified the portfolio accurately with the assets that would hedge against inflation.
A better backup plan for investments as retirement funds would be savings or emergency funds that would cover your expenses for 6 months. These savings will help you financially if the investment market goes down.
Continue Investments
Though you have been investing to make use of the amount during retirement, it is recommended not to break the investments entirely. You can continue the investments and use only a part of them for your monthly expenses. There are several investments like deposits, bonds, etc. that work as monthly schemes. You can consider such investments as a part of your investment portfolio. The monthly schemes plan will also help you plan your monthly budget precisely.
Also, check: Things to avoid while planning investments for Retirement
Health Insurance
One major concern of retirees is their health. Getting health insurance that provides maximum coverage is very important. Without health insurance, you might have to spend your hard-earned savings or investments on your medical expenses.
Also, apart from health care, it is also important to set your healthy lifestyle which will have a positive impact on your expenses as well.
Get a Financial Advisor
Though you have made an accurate budget and are all set to enjoy your retirement phase, you might have missed important factors in financial planning. A well experienced financial advisor would be able to set you on the right path by understanding your monthly necessities, planning your investments and savings.
Related: Why having a Financial Planner is Important?
The retirement phase is the most essential phase of everyone’s life and if not planned right it can land you in bad financial troubles. The major goal of the retirement phase must be to make your savings last long without any financial hurdles. You can follow these steps and live a financially peaceful retirement life.