Scotia Investments

Financial Learning Centre

Scotia Investments Financial Learning Centre

Money Management Guide - Tips for Retirement

That happy day has finally arrived when the worker finally says a hearty goodbye to daily traffic jams, micro managing bosses, and office politics. The newly retired person reaches into his or her 401(k), IRA, or other retirement investment vehicle and begins withdrawing retirement funds so diligently saved all these years. While saving is certainly a good thing, now the question becomes how to properly manage that money.

Why is Money Management in Retirement Important?

So much emphasis is placed on saving for retirement that learning how to budget effectively in retirement becomes secondary. Throughout their career, workers are taught the importance of participating in a retirement plan, yet rarely is there any discussion on how to manage that money after retirement. The retiree will need to consider many factors when budgeting their money, including:

Money management in retirement is important for many reasons. While health can be unpredictable, life span has increased due to technological progress in medicine. Living longer means the person will need to exercise even more prudence in budgeting during retirement. Social security also becomes an issue.

While many Americans believe that social security payments will financially cover the full cost of their retirement, in reality social security only pays around 40 percent of pre-retirement income.

Smart Retirement Money Management Tips

In withdrawing funds from retirement savings accounts, retirees should first consider taking money from their regular savings, Money Market account, or other investments while their retirement funds continue to grow.

Then they can begin to withdraw retirement savings funds from their tax-deferred retirement accounts and tax-free retirement accounts. Other smart money management tips include:

Bottom Line on Smart Money Management Tips in Retirement

Bottom line, retirees will have to learn how to effectively budget their money during their retirement while balancing saving money with having fun. Retirees should dip into their regular savings, Money Market account, or other investments first, and then begin receiving distributions from their retirement accounts

Other money management tips including reducing spending on luxuries and waiting until age 70 to retire may help retirees save money on a fixed income.