Retirement is that time you want to relax and enjoy life with your loved ones. Managing money during retirement is somewhat easier because your sources of income are rather limited. As such, you want to be more disciplined with your spending without being too frugal. This guide offers five tips on how you can manage money during retirement.
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Convert Home Equity to Income
Home equity makes a great source of income for homeowners in their retirement. There are several ways of converting such capital to income that helps them during this time. First, they can downsize to a small space. This alternative is ideal for homeowners living in extremely expensive neighborhoods or houses that are extremely large for the senior’s needs. Another way of converting home equity into a source of income is to apply for a reverse mortgage. This loan is designed to eliminate ongoing mortgage payments and take out a loan against your home, though the borrower retains ownership of the property.
Have a Plan for Out of Pocket Health Expenses
Most retirees account for fixed expenses like utility bills and property taxes when making a retirement budget but leave out medical expenses. Admittedly, it is difficult to plan for health expenses. Plans such as Medicare don’t always cover 100% of health care costs hence, the need to anticipate for out of pocket expenses. Health insurance policies also come in handy, but they also don’t cover all the medical expenses. Retirees can open a health savings account which helps account holders prioritize retirement savings. The savings are tax deductible, the interest is tax-deferred, and you can spend the money on medical expenses without any tax implications. Another way of planning out of pocket health expense is to take out a whole life insurance policy. Find an insurance company that will sell your life insurance policy which allows you to take out a loan against the policy during an emergency. Alternatively they can enroll to Medicare Supplementary plan. The traditional Medicare plan only covers a part of the healthcare cost, but the Supplementary program covers the remaining cost of medical expenses.
Talk with Family
A family is a great source of joy, especially during old age. This does not mean you should spend all your retirement money helping out adult children. Keep in mind you don’t have as many opportunities to make money; you can only make the best of what you have hence, the need to account for every expense.
Wait as Long as Possible to Start Social Security
Social Security provides fixed monthly income for as long as you live, so you want to wait long enough before you start using social security. The difference in the value of your social security when you are 65 and 70 years can be hundreds or thousands of dollars. If you have other sources of income, you should consider delaying until an older age. This way, you enjoy a higher standard of living, especially when your body is not as strong to work.
Make Trade-Offs
Some retirees are tempted to travel places they desired to go for years. When it is a great way to relax and enjoy life, you need to focus on what is important. If you still want to visit Paris, you need to plan and make several cutbacks.
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