How will you Finance your Retirement?

Do you have a retirement spending plan? Many people who are close to retirement age suddenly realize that they haven’t planned for retirement beyond putting some money aside or starting a 401(k). The problem is that it takes more to create a retirement spending plan than just having a bit of money put back. You have to carefully plan how that money will be spent over the course of the rest of your life or you may find yourself facing financial difficulties.

How Much Money Can You Spend from Savings Each Year?

If you meet with a financial planner to look at your retirement plan, one of the first things they will discuss with you is how much of your savings you can afford to spend each year. Many suggest using only three to five percent of your savings every year. However, if you don’t have a good sized retirement fund, that’s not going to be very much. The good news is that you should have other income besides your savings account. You will also have your social security income. You can make use of the retirement benefits with ss security payments by using it to cover most of your bills and supplementing it with money from your savings.

Managing a Retirement Portfolio

If you have planned for retirement, you may have a retirement portfolio that includes your savings, some stocks, and some bonds. Most planners recommend splitting your portfolio between the riskier stocks and the steady bonds. Stocks may earn you more money, but they may also lose you money. Bonds, on the other hand, don’t earn as much, but there is very little risk in bonds. In the past, financial advisors would often recommend using a savings account to generate interest. However, today’s interest rates for savings accounts are often only one percent or less, so you can’t really earn any extra money this way.

How Social Security Helps You

The benefits you receive from social security will provide some funds for your retirement. Some retirees can actually live on their social security because they have paid off most of their large sources of debt (their house and vehicles) and have little credit card debt. However, while you should certainly factor in how social security will help you, you shouldn’t count on it being your only source of income. Most people need to supplement it with either money from a portfolio or even money from a part-time job.

Arriving at your Monthly Budget

Once you know what you’ll be making from your social security, you can calculate how much of your savings you can spend annually and then break that down to a monthly number. This monthly stipend plus your social security needs to be enough for you to live on. If you make more off of stocks and bonds, then you may be able to repay your savings account or use this extra money to go on vacation or purchase luxury items. However, you should never count on it to live on, especially if most of your extra income comes from the stock market. Also remember that you may need to adjust the amount you take from savings if you live longer than you anticipate. It’s becoming more and more common for people to live into their late 80s or 90s, so make sure you don’t outlive your savings.

Retirement and Your Credit Score

Don’t forget that even after you retire, you should still monitor your credit regularly. You can still have your identity stolen or your credit card used for fraudulent purchases. The elderly are often the targets of identity theft, in fact, since they may not know of the different ways their identity can be stolen. Be sure you check your credit report often during your retirement to make certain it’s correct. You don’t want your retirement ruined by a battle over your credit.

Joy Mali is an active blogger who is fond of writing articles on credit monitoring and educating people to monitor their monthly credit report to prevent you to be a victim of credit fraud. Follow her on Twitter to know more on how you will finance your retirement.