For a large portion of your life, you have to save and plan for your retirement. Even once you retire, the process of planning for retirement has to continue. This is for several reasons, but more importantly for your financial freedom and financial security. For many persons, the objective is to avoid retiring in the same traditional way that others do. You want to retire in such a way that you can really enjoy the years of your retirement.
A Personal Decision
Some people in retirement choose to spend their savings in a controlled manner until their death. Others tend to want to hold on to it and leave some of the money behind as an inheritance to children and grandchildren. However, this should be a personal decision because it will depend on whether there is sufficient investment allowing the retiree to live only on the return on investment or having enough savings to use while in retirement. Not all retirees have the same flexibility. For instance, if your savings were only $100,000 and $35,000 was needed each year to take care of living expenses, you would have a financial quandary, whether you were to invest these funds at a ten percent return rate. Your savings could be used up in about six years and then you will have to depend on the government’s welfare program to survive. Or you may have to work with a company as a retiree where you would be greatly underpaid.
Rate of Withdrawal
Let’s assume that you have done your due diligence by saving and investing in your retirement. If you did this, then you would have a very nice nest egg as a cushion. However, it is important to know the amount of money you can actually take from that amount every year without using everything prior to the end of your life. In other words, what is your rate of withdrawal? Ideally, the best thing is to use an amount that you need, especially in the early part of your retirement. In the beginning, you will want to travel and indulge in your favorite hobbies. However, try not to use up too much of your nest egg to do so. Do everything in moderation and don’t dig too deep into your retirement funds since you have to be prepared for the unexpected such as high medical bills and other expenses that may crop up.
Change in Lifestyle Choices
When retired, you may have to change your lifestyle choices to cut down on cost. When you are planning on being involved in anything that requires spending, it is best that you evaluate this first. Keep your spending habit in check as you probably did while saving up for your retirement. Keep good records as to how much you spend. If you have to book a vacation cruise, shop around first for the best price. The same is true if you were to buy a new golf club or any other important purchases.
Personal financial growth does not end when you get to 65 or older. Retirement is the beginning of new financial planning details. To live with the money that you have saved or invested for retirement, you have to carefully monitor your spending and risks. While you enjoy the leisure, you should have a financial planner take care of the details for you.