People spend much of their lives putting away money for their retirement, saving up as much as they can. However, when they actually retire and that income stops, they have to change into a new gear and a new mindset. While this shift may seem natural, the reality is that it can be quite intimidating and even frightening for those involved.
The trick, professionals say, is to have a plan for spending and to manage the money well. While sticking to a budget is good, the plan should be more comprehensive than that, as it includes more than typical things on a household budget, like food and utilities.
For example, one of the biggest things that the man who heads the Advice Lab for J.P. Morgan said that retirees must keep in mind is the cost of health care. When thinking about care planning, they need to know how much they should expect to spend, and they also need to know that the unexpected will sometimes happen. They can't plan directly for everything, but it is important to have money and a plan to react to whatever arises.
People also need to think about taxes that still have to be paid, either on their investments or on basic things like property that they own. Furthermore, they need to consider inflation and determine what impact that is going to have on their money.
A simple trick that can help, the J.P. Morgan employee said, is moving to a different state. In some states, tax laws really work in favor of retirees, which can help their money go farther. Examples given included both Texas and Florida.
Source: Fox Business, "How to Create a Retirement Spending Plan" Casey Dowd, Jul. 17, 2014