Home Pay off Liz Weston: 3 tasks for new retirees that will pay off later

Liz Weston: 3 tasks for new retirees that will pay off later


After a lifetime of revivals and meetings, you might expect a lot more unstructured time in retirement. But taking care of another to-do list early on can set you up for a better retirement.

The following assumes that you have already done some basic financial planning. Ideally, before you retire, you’ll create a budget, decide when to apply for Social Security, establish a sustainable rate of withdrawal from your retirement funds, and figure out how you’ll cover health care expenses. If any of these topics remain a mystery, consider speaking with a paid financial advisor. If money is tight, you may qualify for free or low-cost counseling through the Foundation for Financial Planning, the National Association of Personal Financial Advisors, or the Association for Financial Counseling & Planning Education. , among other organizations.

Even long-time do-it-yourselfers should consider getting expert retirement planning advice, says Catherine Azeles, certified financial planner and investment consultant in Harrisburg, Pennsylvania. While your days may be simpler without the demands of the workplace, your finances often become more complex.

“There are a lot more things that go into the distribution phase of retirement than the accumulation phase,” says Azeles.

With your plan in place, here’s what to do after you retire.

Adjust your spending plan

Inflation and market volatility can be problematic for everyone, but they are particularly dangerous for retirees. If you don’t earn income, you can’t ask for a raise to compensate for the price increase. Meanwhile, bad markets early in retirement can significantly increase the chances of running out of money.

One way to cope is to identify discretionary spending that you can reduce. Cutting spending can help you offset inflation, but it can also help you ride out bad markets, says Katherine Roy, chief retirement strategist at JP Morgan Asset Management.

Traditionally, retirees were encouraged to withdraw a certain percentage of their investments in the first year – 4% was a popular figure – and to increase the withdrawal by the amount of inflation each year. JP Morgan research, however, shows that people are less likely to run out of money if they forgo that inflationary boost when markets return less than 5% in a year, Roy says.

Get good tax advice

Many people’s tax situations change as they transition into retirement, and they may have unique opportunities to manage their tax bills, says Azeles.

Good savers, for example, could find themselves in a higher tax bracket at age 72, when the required minimum withdrawals from retirement accounts typically begin. In some cases, it may make sense to do partial Roth conversions in your 60s to spread out and reduce that tax bill, Azeles says. A tax professional or financial planner can help you determine if conversions are a good idea, and if so, how much to convert each year to avoid triggering a higher tax bracket or Medicare surcharges.

Another way to lower your tax bill if you have more money than you need is to donate to charities directly from your IRA. So-called qualified charitable distributions can begin at age 70.5.

Even if you’re not awash with money, your taxes may be higher than expected. Most retirement income — including Social Security, pension payments, and retirement fund withdrawals — is potentially taxable. If you do not have taxes withheld from these payments, you may need to file and pay estimated quarterly taxes to avoid penalties.

Take care of your health

Too often preventable diseases shorten life or limit what people can do in retirement. Consider investing some of your new free hours in maintaining or improving your physical health.

A medical checkup with your doctor can help you identify conditions that need treatment, keep you up to date on vaccinations, and determine what screenings you need to schedule. You can also discuss how to start or increase an exercise plan. The Centers for Disease Control and Prevention recommends 150 minutes of moderate exercise — such as brisk walking — each week, plus at least two weekly sessions of muscle-strengthening activities for all adults. People aged 65 and over should add balance exercises (you can find them online), such as standing on one foot.

Your mental and emotional health is also important. The people who struggle the most in retirement are often those who don’t have a plan to replace some of the rewarding aspects of work, including sense of purpose, structure and social interaction, Roy says. Social isolation can reduce both life expectancy and happiness, so consider ways to connect with other people through social engagements, volunteer work or other activities, he recommends. -she.

Also, cut yourself some slack. Retirement will have its challenges as well as its rewards, and you may need time to get used to this new phase of life.

“Be kind to yourself, because it’s such a big transition,” Roy says.

Liz Weston is a NerdWallet columnist, certified financial planner, and author of “Your Credit Score.” Email: lwestonrdwallet.com. Twitter: lizweston.