Size up spending.
Years before you retire, determine what you want your portfolio too once you stop working full-time. Work up a retirement budget and add up your sources of income such as Social Security, pensions, and retirement accounts. If the income generated can’t cover the bills, look for ways to trim spending.
Stick with stocks.
Resist shifting all assets in your portfolio into income-producing investments such as bonds. While bonds are important, so are stocks for portfolio growth. Hire a fee-only financial planner for a one-time retirement analysis and an appropriate asset allocation for your needs and risk tolerance. To find a planner, visit www.napfa.org.
Consolidate accounts.
Moving all your assets from multiple financial institutions to one will make your total portfolio easier to track in retirement. Also, at many firms, the greater your assets under management, the more likely you will be entitled to more favorable fees and other perks.
Financial wisdom from real retirees
One of the best ways to stay motivated about saving for retirement is to talk to retirees. Here’s what they’re likely to tell you:
Spending rises.
While most people think that spending goes down when you stop working, the opposite often is true. While dry cleaning and commuting costs decline, health-care, food and even heat and electricity expenses typically climb.
Inflation hurts.
When you retire and are on a fixed-income, the rising cost of everyday items, year over year can put a strain on your budget.
Borrowing is tough.
When you no longer earn a paycheck, getting approved for a loan is a lot harder. If you own your home, consider taking out a home-equity credit line for emergency cash needs before you stop working.
Kids want stuff.
Your adult children may come to you for cash to help buy homes, pay down debt, and cover education and other large-scale child-rearing costs. You may have to learn to say ‘no,’ much as you’d like to say ‘yes.’
