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What To Do If You Are Retiring Soon.

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

If you are retiring soon you might be feeling a little anxious. That’s understandable. More than likely you have a thousand questions running through your mind all at the same time. You face so many uncertainties about your income and expenses that it can be daunting.

A woman I spoke with recently faced this problem recently. She was 71 and was being gently pushed into retirement by her employer. She had no idea how to approach the issue and she was frantic.

I understood her feelings of course but I reminded her that retirement is supposed to be the best time of her life. It’s time to enjoy. That being the case, here’s what I suggested she do and what I suggest you do if you are retiring soon and want to change the dynamics into something a little more fun.

1. Retirement Spending

There is nothing more important to get a handle on than spending if you are retiring soon. That’s because your income will likely be fixed but your expenses aren’t. In fact, you’ll have more time to spend money since you won’t be wasting time at that pesky job anymore. As a result, don’t be surprised to see your spending rise unless you pay careful attention to this issue.

The best way to make sure spending doesn’t get out of control when you retire is to start tracking it. But don’t wait until you retire to start this process. Begin now. Find out where your money is going and how you spend it.

Once you know how much you spend on average now, make some projections about how much you will be spending once you retire. Then, track your actual spending against your expected spending. If you need to cut back, do so immediately. Don’t wait until you’ve exhausted your retirement investments to figure out that your spending is out of line.

2. Retirement Income

Your retirement income consists of Social Security Insurance and pensions – but that’s not all. Remember that your investments can generate income as well. And don’t be fooled into thinking that you have to accept the pitiful low rates banks are paying. There are a number of ways to invest and create income. One of my favorite approaches is to use mutual funds to create income.

If you own rental real estate, that can also be a great help in creating retirement income. Just make sure that your capital provides an appropriate return. If your real estate isn’t performing well, consider doing a 1031 realty exchange to get into other real estate that generates better returns.

Make sure you understand all your potential sources of income if you are about to retire soon. Also, make sure that your investment portfolio is maximized and creates the most income possible in a safe manner.

3. Retirement Life

You still have financial goals once you retire – they are just different from the financial goals you had when you were working. The main objective is not to worry about finances and to enjoy your life. If you track your spending and match it to your income, you won’t have any nasty surprises.

Some people decide to sell their homes and become renters when they retire. They made that decision once they understood the true cost of home ownership. Others have moved to other parts of the world in order to reduce their cost of living. These measures may or may not suit you – but they are options.

Prioritize what’s most important to you in retirement and then build your financial life to support those priorities. I have a client who thought her main priority in retirement was to hold on to her home (which required a great deal of money to keep up.) When she realized that the cost of holding on to the home was eating up her travel budget, she dumped the house fast.

Realize that everything has a cost and a benefit. By being clear about your objectives, you’ll be able to make better decisions about what spending makes most sense and how to use your retirement income.

Are you retiring soon? What other considerations are important to you?

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Comments

  1. Jerry Parks says

    April 15, 2013 at 8:38 AM

    Neal,
    I really enjoy your articles. I like to save many of them for reviewing again later and I think if you could add a printer link to the page it would make it easier to copy and save.
    Thanks,
    Jerry Parks

    Reply

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Who is Neal Frankle

Neal Frankle

I'm a Certified Financial Planner™ with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
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