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Sound Advice: December 6, 2023

Some Suggested Financial Adjustments for Retirees

Financial adjustments for retirees are crucial to ensure a comfortable and secure retirement. Here are some worthwhile financial adjustments and considerations for retirees:

1.     Create a Budget: Establish a realistic budget based on your retirement income and expenses. Categorize your spending and prioritize essential expenses such as housing, healthcare, and groceries.

2.     Emergency Fund: Maintain an emergency fund to cover unexpected expenses. Aim for at least three to six months' worth of living expenses.

3.     Healthcare Costs: Be sure to fully understand your healthcare coverage and consider supplemental insurance plans to cover gaps in Medicare. Account for potential long-term care expenses as well.

4.     Minimize Debt: Aim to pay off high-interest debt before retiring. This can significantly reduce financial stress and free up more of your retirement income.

5.     Investment Diversification: Diversify your investments to balance risk and return. Consider a mix of stocks, bonds, and other assets based on your risk tolerance and financial goals.

6.     Withdrawal Strategies: Develop a sustainable withdrawal strategy from your retirement accounts (such as 401k and IRA) to ensure that your savings last throughout your retirement. The 4% rule is a common guideline.

7.     Social Security Optimization: Understand your Social Security benefits and decide the best time to start claiming them. Starting prior to Full Retirement Age (now: 67) will reduce benefits (even more if you earn above specified levels). Delaying benefits can increase your monthly payout.

8.     Downsizing: If your home is too large for your needs, consider downsizing to a smaller, more affordable home. This can free up equity and reduce ongoing expenses.

9.     Part-Time Work: Explore part-time work or freelance opportunities if you want to supplement your retirement income and stay active professionally. But prior to Full Retirement Age for Social Security, earned income may reduce your benefits.

10. Estate Planning: Update your will, designate beneficiaries, and consider setting up trusts to manage your assets and estate distribution efficiently.

11. Tax Efficiency: Be mindful of the tax implications of your financial decisions. Consult with a tax adviser to optimize your tax situation in retirement.

12. Stay Informed: Keep yourself informed about changes in financial markets, tax laws, and retirement policies that might affect your financial situation.

13. Stay Healthy: Although not a financial adjustment per se, maintaining good health can significantly reduce healthcare costs in retirement. Invest in preventive healthcare and a healthy lifestyle.

14. Long-Term Care Insurance: Consider purchasing long-term care insurance to cover potential costs associated with assisted living or nursing home care.

15. Review and Adjust: Regularly review your financial plan and make adjustments as needed based on changes in your lifestyle, health, and financial markets.

It's also highly recommended to work with a Certified Financial Planner or adviser who specializes in retirement planning. They can provide personalized advice based on your specific financial situation and goals.

N. Russell Wayne, CFP

Any questions?  Please contact me at nrwayne@soundasset.com 

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