Retiring and Your Finances: Ways to Keep Your Cash Flow and Credit Going

Written by Georgina Taylor

Retirement is a great thing to look forward to: you’ll be able to spend more time doing what you love and you won’t have to worry about the daily responsibilities a life-long career requires. Once retired you will be in control of your time and free to be as active or relaxed as you choose. Yes, the best days are yet to come.

Unfortunately, many people are not financially prepared to live a life without having to work for a living. Without enough money coming in to pay the bills and still have some left over for you, you may find yourself in a downward spiral that affects your credit score, making it harder to find relief. Managing your finances on a fixed income is the most important thing you can do in retirement so you can enjoy the fruits of your labors. Here are some helpful hints.

Know Your Budget

Knowing exactly how much money you need every month to live is very important. This will help keep you from failing to pay loans, credit card debts or mortgages that you are responsible for.

First, figure out how much you will need for living expenses: house payments, food, insurance, gas and electric, phone, internet, any medicines you pay for – anything you cannot miss a payment on. Secondly, choose an amount to set aside each month for emergencies: you never know when you’ll need access to cash because of an accident or other unforeseeable event. One rule of thumb says you should set aside enough to cover all your expenses for six months. Finally, think about any short-term investments you want to make and set aside a little for those.

Everything left over is yours to do as you please.

Keep Your Credit Score Up

By paying your bills on time, you lessen the risk of your credit dropping in retirement. This can help you for future purchases, like finally buying that dream vacation home or helping your grandchildren through college.

Although you’ll be on a fixed income, make sure to pay off debts as soon as you can to avoid problems. Even though you are retired it is important to keep your score high. Should you need to improve your score, there is software to improve your credit score. The service provides you with credit reports from agencies, identity theft tools, as well as various reports, charts and graphs to assist you in your efforts.

Don’t let your credit score slip just because you retire: stay on top of everything and you’ll have plenty of great days ahead.

Look for Ways to Reduce Fees

Surcharges and fees for basic things like bank accounts and credit cards should be a big no-no during retirement. A few fees here and there can really add up if you are on a fixed income.

Look for ways to eliminate fees by using newer technology. Find a bank that offers free direct deposit so you can have all of your checks go into the account without a yearly fee. You can also choose online banking to move money around without penalties. If you use a credit card why not one gives you points toward future purchases? The more ways you can find to eliminate fees, the better your financial situation will be.

Consider a Reverse Mortgage

If you are over 62, you may qualify for a reverse mortgage, which will allow you to forgo your mortgage payments. This is a great way for older retirees to save some cash to use for other bills and purchases.

With a reverse mortgage you use the equity built up in your home to pay for your loan, so the more equity you have, the better. This can really take the burden of a large monthly payment off of your shoulders so you can enjoy your retirement. If you take a reverse mortgage, although you won’t have any payments you will still be responsible for property taxes and your homeowner’s insurance.

Open Direct Deposit

Chances are, once you retire you will be receiving money from several different sources. You may have a pension or 401K that you draw from each month or dividends from stock or social security. If you don’t learn to manage these sources quickly, you may find yourself with less money than you planned.

Having each of these sources deposited directly into your savings or checking account eliminates the need to keep track of everything. Funds instantly arrive in your account the moment they are disbursed, so you don’t have to worry about forgetting to deposit a check. This way, all of your money will be easily countable and retrievable, giving you one less thing to worry about so you can enjoy your retirement.

If you manage your money right, there’s no reason retirement can’t be a great time without financial worries!

Georgina Taylor works closely with those approaching retirement age to get their finances in order. She is a personal finance consultant for the over 50s and shares her knowledge around the web. 

10 Unexpected Retirement Costs to Think About

Written by Stephanie Lynch

Even if you think you’re the most prepared retiree on the planet, there will still be those pesky unexpected costs that add up over time and may put a burden on your budget.

According to the AARP, retirees fear outliving their savings more than they do death.  Since you don’t want to be this statistic, here are 10 unexpected costs you may have never thought of and may want to prepare for just in case it does happen:

1. Divorce

Even if you feel you’re happily married, you do realize you’re going to be with your spouse a lot more often than you were before.  This could be a good thing, or it could be a disaster waiting to happen.

If you think about it, you probably worked a 9-5 job, leaving you with very little time to spend quality time with your loved one.  While less than 3% of retirees divorce, it’s a situation that could eat up a lot of your assets, especially if you don’t have a prenup.

2. Fraud

Fraud is rampant on the Internet, and if you use it to purchase items, complete bank transactions or send money to friends, you may want to think about the chances of a hacker and/or virus attacking your computer.  Sure, while banks are pretty good at spotting scams and preventing you from sending cash, they can’t do much if you send your money overseas to someone who swindled you.  While the chances are slim, scams have cost some retirees tens of thousands of dollars.  Remember fraud happens outside of the Internet as well, so it’s always best to do your due diligence before sending your money to any organization.

3. Poor Investments

Whether it’s trusting the wrong person or making the wrong investment decision, you’re going to want to take a close look at where your money is invested.  Do you have your money invested in bonds?  CDs? Or is it a tech company that started up yesterday?  While it’s okay to risk your money in your 20s, it isn’t okay to roll the investment dice when you are on the brink of 70 or 80.  Poor investments could easily cost you 10 to 30% of your nest egg.

4. Death of a spouse

This is a sad one, but it can easily happen to anyone in retirement.  Whether your spouse was working a part-time job, had a pension or any sort of other income, you can count on this being affected if your spouse were to pass away.  With this, however, it can be avoided ahead of time if you prepare for this worst case scenario.  For example, if your spouse were to have a pension, what portion would you get?  What about social security?  How would that change?  Be sure to know this so you know how your budget is going to change.

5. Family emergencies

If you have grown kids, what happens if a family emergency were to happen?  Would you be willing to help financially?  For example, let’s say they lost their car because it needed a new engine, and without a new one, they can’t make it to their jobs.  There could be some situations such as these that could potentially cost your budget thousands of dollars.

6. Drop in home value

While we can’t predict the future, what happens if your home is worth 25% less than what it is today?  If you plan on downgrading in the future and taking some of that equity, you may be hurting if your value isn’t what you think it will be worth in the future.

7. Dental expenses

Sure, you will be covered by Medicare and a supplemental insurance if you so choose, but what happens if you don’t have any dental insurance?  The average root canal can cost you a few thousand dollars, while a few cleanings and a new crown can cost close to that figure as well.  We all know our teeth won’t get any better as we age, so it’s best to budget for those unexpected dental bills.

8. Home repairs

As your home ages, it’s going to increase the chances of replacing big name items such as the roof, air conditioner, water heater and if it’s old enough – maybe the plumbing and electrical.  Regardless of how old your home is, you will want to make sure you have a budget set aside to be prepared to pay for a $6,000 new roof or $1,200 water heater.

9. Expect tax changes

We can’t assume the tax code will stay the same forever; in fact, if we look at that past, we can only assume it won’t.  If any of your investments are affected by taxes, what happen if these taxes increased 5, 10 or 20%?  Would it hurt your budget?  For example, qualified dividends aren’t taxed for the first $74,900 if you’re married filing jointly.  What happens if the government wants to tax these dividends like income?

10. Unexpected travel

While you may plan on traveling throughout retirement, you have to think about unexpected travel such as weddings, a funeral or some event that you don’t want to miss.   As you know, an airline ticket, hotel room and rental car can easily cost you $2,000.

Retirement can often last you 30 years or more, and with this long journey will come this unexpected costs.  As long as you make room in your budget for these surprising costs, there’s no reason you have to toss and turn thinking about how the bill will be paid.

Adjusting to Retirement: What to Expect

Written by Andrew Wilson

 When you spend decades preparing for your retirement, it’s easy to think of retirement as little more than a financial undertaking. Save enough money, quit at the right time, live within your means, and everything will be fine, right? But the adjustment to retirement is one of life’s major transitions. After all, you’ve probably defined yourself by the work you do for decades. So when you’re no  longer working outside of the home, it’s easy to feel a bit lost. Here’s what you can expect from your transition.

A Financial Shift

For perhaps the first time in your life, you’re no longer drawing in a paycheck, but you are taking money from your retirement stockpile. That alone is enough to leave you a bit uneasy, so don’t be surprised if you find yourself fixating on finances for a while. You’ll need to find ways to adjust your expenses. Ditch that gym membership you no longer use, and consider cooking more meals at home. Once you’ve fallen into a new financial groove, though, you may be surprised to learn that you really don’t have to deprive yourself if you’ve appropriately planned for your retirement.

Anxiety About Money

When you’re not making money, it’s natural to be anxious about finances. And if you didn’t save enough for retirement, or if you have unexpected expenses, anxiety is almost inevitable. Establish a relationship with a financial advisor you trust early on, then keep working with this person as your situation changes. If your anxiety persists, consider this: seniors have options that younger people do not. If you own your own home and need cash to fund an emergency, home repairs, or some other expense, consider a reverse mortgage. This option offers you tax-free cash that you do not have to repay as long as you remain in your home.

Confusion About What’s Next

In the first weeks of retirement, you might feel positively giddy, totally footloose and fancy-free. But as the realities of life without work set in, you might begin feeling useless, confused, and even depressed. This is normal. Give yourself time to adjust to this significant life development. Take some time to consider how you want to spend your time, then do all those things that working always kept you from—whether it’s starting a garden, starting a nonprofit, or just spending more time with your family.

Increased Family Conflict

You probably envisioned retirement as a chance to spend more time with the people you love the most. But more time together can also mean more conflict, particularly if you’re also struggling with the emotional adjustment to retirement. Don’t be surprised if you find yourself snapping at your spouse more, or if your kids want a break from togetherness. Give it time and be willing to work through it, and you’ll soon find your family relationships adjusting to your retirement.

A Shift Toward Generativity

Generativity is the tendency to look toward future generations and what you can contribute. Shifting toward this mindset marks a major psychological change that can imbue your retirement with meaning and purpose. Rather than focusing on what you can get out of your retirement, you might find yourself eventually considering what you can offer the world, the next generation, and your family. If you are struggling with the retirement adjustment, know that this shift toward generativity may be the most helpful way to settle into your golden years.