Eggedgyu/Getty Images/iStockphoto
Most Americans are looking forward to retirement and may think it will give them more time to do the things they love outside of work, like spending time with family and traveling. yeah. While it may definitely be everything you dreamed of, retirement can also come with some challenges, especially when you first set sail.
See also: 10 Best Canadian Cities to Retire on a Budget of $2,500 a Month
Find out: 3 ways to survive a recession and live your retirement
Consider seven financial challenges that may arise during your first 10 years of retirement.
Adapting to new sources of income
Once you sign a contract and retire, the way you receive your income changes dramatically. Instead of receiving a bimonthly paycheck (or whatever you’re used to), you’ll receive an allocation from your retirement investments and, in some cases, your Social Security benefits. Most retirees don’t earn as much as they did during their working years, so they need to adapt to this new normal and manage their cash flow accordingly.
Downsizing
A great way to save money during retirement is downsizing. This involves moving to a smaller home, perhaps in a more affordable location. But this is a surprising challenge. Although it can save you a lot of money in the long run, downsizing can be difficult to implement. This is primarily due to the fact that when interest rates are as high as they are now, people are less willing to buy homes. Therefore, your home may be on the market longer than you would like.
Additionally, if you decide to buy your next home (as opposed to renting), you’ll likely be hit with high interest rates, which could make moving a hassle.
planning a big purchase
Before you retired, you may have relied on bonuses from your job (or overtime) to make big purchases like new furniture or home renovations. However, once you retire, you’ll likely be relying on a fixed income, and you won’t have the financial cushion you had while working. Simple splurges can have complex financial consequences, so you need to budget more efficiently.
fill the days
Most employees have fairly demanding schedules. I wake up in the morning, go to work, spend hours there, and then go home. Free time often occurs at night or on weekends, but not always. Retirement gives you a ton of free time, but that free time can be surprisingly expensive. You might want to eat out more often, take mini-vacations, or do other activities that cost money. Perhaps now more than ever, you’ll find that budgeting your time becomes just as important as budgeting your money to avoid the risk of depleting your vital savings.
Balance portfolio risk
Retirement is not the end of investment management, but it can and should change your investment strategy. You will need to continue to diversify your portfolio while balancing growth and income investments. They also need to avoid risks and instead choose less aggressive approaches than they might have safely taken during their playing days.
Handling of taxes
Unfortunately, quitting your job doesn’t mean your taxes disappear, but their nature changes. To do it right for yourself and his IRS, you need to decide if and when to do a Roth conversion, and when to withdraw from your IRA and, if applicable, your pension plan. You will also need to determine the appropriate time to start collecting Social Security benefits.
Obtain and maintain financial education
I hope that by the time you retire, you will have a deeper understanding of your personal finances and your situation in particular. But even if you do, you need to continue your education. This means reading books and listening to trusted podcasts about managing your retirement money, and getting valuable guidance and insight from financial advisors and retirement planners.
GOBankingRates Details
