10 Great Tips for Managing Money in Retirement

10 Great Tips for Managing Money in Retirement

In some ways, managing money in retirement gets a little easier than before.  You only have the money you have, so your options are somewhat simpler and more limited.  On the other hand, the rules of money management shift in retirement so it may seem more complicated to you.

Managing money retirement

No matter whether you find it easier or more challenging, here are 10 tips for managing money in retirement:

1. Be Tax Efficient with Withdrawals

Every penny counts when managing money in retirement and that is especially true when it comes to tax savings.

Every retirement account you have may be taxed differently and you will want to be strategic with how and when you take withdrawals from each bucket.  A few tips to consider:

  • Prioritize withdrawals for your required minimum distributions — mandatory withdrawals that start at age 72.
  • Consider a Roth conversion to spread out when and how much you are taxed.
  • Be aware of how much you withdraw each year and how the amount impacts your tax bracket.

Taxes are really complicated and what is best for you is different from what is best for anyone else.

Tax efficiency is one compelling reason why you might want to work with a good financial advisor for retirement.  You will want to look for someone with experience specific to income taxes as well as someone familiar with retirement drawdown strategies.  (Many financial advisors are well versed in helping clients save money but have less experience with managing and drawing it down in retirement.)

2. Focus on Creating Retirement Income

If you have been saving money for retirement, you have probably been worried about stashing aside as much as possible and maximizing your returns on investments.

However, when you retire, most experts recommend that you worry less about returns and more on figuring out how to turn your retirement assets into reliable retirement income.

In fact, research indicates that retirees who have guaranteed their retirement income are happier and much less stressed than retirees who make unpredictable withdrawals from their retirement accounts.

Annuities are one way to turn retirement savings into a predictable income stream.

3. Make Trade Offs — Know What is Important to You

“I want it all and I want it right now” is not a retirement money management mantra that works well for almost anyone.

The good news is that at this point in our lives, we know — better than ever — what we like and what we want.  If you focus on what is important to you, you may find that you can spend less overall.

If a trip to Europe is on your list, you can probably make that happen no matter your finances.  It just may require a lot of prioritizing and cut backs in other areas of your life.

4. Prioritize Spending on Yourself

Family is one of our biggest sources of joy.  However, unless you have budgeted for helping out adult children, brothers and sisters or your own parents, you simply might not have the money to help them out financially.

Once you are retired, you do not have as much opportunity to make money.  You are required to live with what you have.  In retirement, every expense needs to be accounted for.

Learn more about the problems of boomerang kids, helping out your own parents and how to prioritize paying for college vs retirement.

5. Look at Your Home Equity

Experts predict that home equity is going to help out most of us lucky enough to own a home.

For most households, home equity represents our biggest source of wealth and there are a variety of ways we can use that wealth to help pay for retirement.

  • Downsizing is an efficient way access the money you have in your home and a great option if you are living in a relatively expensive location or in a home that is too large for your needs in retirement.
  • If you love where you live and want to stay there for the rest of your life, then a reverse mortgage is an increasingly popular way to eliminate ongoing mortgage payments and/or borrow some of your own home equity while retaining ownership of your home.

6. Wait as Long as Possible to Start Social Security

The differences in lifetime value between starting Social Security at age 62 and delaying until 67 or later can be hundreds of thousands of dollars.

Social Security offers you guaranteed monthly income for as long as you live.  If you can wait to start it, you will enjoy a higher standard of living.

Use a Social Security calculator to assess the best time to start or look at Social Security as a part of your overall retirement plan.

7. Be Prepared for Spending Shifts

Just because we have retired it does not mean that we don’t continue to evolve and change.

In fact, numerous studies have shown that retirement spending goes through predictable phases.  When we first retire, we might spend more than before — we are active and doing lots of things.  After that, we enter a period of slowing down and staying closer to home and we spend less than at almost any other period of our lives.  In old age, medical expenses cause spending to spike.

When planning for managing money in retirement, it is useful to be mindful of these shifts.  The NewRetirement retirement calculator lets you set different spending levels and enables you to plan medical spending.

8. Have a Plan for Out of Pocket Health Expenses

Fidelity Investments has been tracking retirement health care costs for years.  Their most recent data predicts that a 65-year old couple retiring in 2019 can expect to spend $285,000 in out of pocket health care and medical expenses throughout retirement.

This amount will be spent on deductibles, co payments, premiums for supplemental coverage, prescription drugs and other expenses that Medicare doesn’t cover, such as hearing aids and eyeglasses.  However, this amount does NOT include the costs of a long term care need which could mean another $100,000 and more in spending.

You can mitigate spending by staying healthy, exploring the best possible supplemental Medicare coverage and researching creative ways to cover a long term health need.

9. Talk with Family — Especially Your Spouse

According to a Fidelity Study, 47% of couples disagree on how much savings are needed to maintain their desired lifestyle (if they agree on desired lifestyle).


  • Couples have different ideas for how they want to spend time.  “Men are significantly more likely to envision indulging in their favorite sports, women are more likely to envision spending time with family, enjoying hobbies and volunteering in their local community.”
  • Thirty-six percent of couples either don’t agree, or don’t know where they plan to live in retirement.

Because your retirement money management involves both you and your spouse, it is important that you get on the same page for spending.

10. Keep Planning

Retirement is not the end of the road for managing money in retirement.  You can not simply create a retirement plan, retire and live happily ever after.

You need to keep assessing your situation and adjusting your plans as you move through life.  Maybe your priorities change or your investments perform differently or perhaps you decide to go back to work.  These events will profoundly impact your overall financial well being.

The NewRetirement Retirement Planner is a unique tool that let’s you assess where you are now and then adjust and maintain your information over time.  This tool was recently named a best retirement calculator by the American Association of Individual Investors (AAII).

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