retirement

Ahh…welcome to your golden years (and to Part 2 of managing your money by the decade)!


ALSO READ: Managing Your Money By the Decade Part 1


In Part 1, we covered your 20s, 30s and 40s.

The recap: live within your means, learn, hustle, and save.

Cool. Let’s dive right into…

The Nifty Fifties:

Your fifties are a time to take stock.

Generally, while people in their 20s and 30s are concentrating on big-picture type stuff, people in their 40s and 50s are getting rid of that last bit of debt whilst also topping up their nest eggs.

Think about your health

This one’s important. You don’t know what your health is going to do in the next few years, so now is the time to think about long-term health care options. Consider a scenario where you may end up in a nursing home or needing full-time assistance. Can you afford that? Will you be able to? If not, then perhaps you should consider long-term care insurance.

Review your savings goals

How close are you to achieving the goals you laid out in the decades previously? Depending on your desires, you might be looking at retiring sooner rather than later. If so, then it’s time to go full speed ahead on retirement saving, putting money away as aggressively as your budget will allow.

retirement

Also…take the time to review your income goals. How much money are you bringing in from passive sources? Are you kid’s savings’ accounts flush?

Decide what’s important to you and what needs to be done to achieve it. Then you can put your retirement plan into action. Your fifties are the decade where you can either realize your retirement or at least see the upcoming retirement date on the horizon. Meet it with open arms.

The Swingin’ Sixties:

Wooooohoo! You’ve made it. Sweet, sweet retirement. Statistically, the average American retires at 66 – but hopefully excellent money management in the previous decades means you’ve got a leg up on the average American.

Just don’t forget to take care of a few things first.

De-risk your portfolio

After years of accumulating assets for retirement it’s now time to change up your allocation. A retirement portfolio from which you are withdrawing funds needs to have much lower risk than the retirement portfolio of a 25-year-old with an investment horizon of 40 years!

This doesn’t mean you should cash out your portfolio, but at the very least you should weight your portfolio differently.

Stay diversified, but shift towards holding more bonds. Bonds tend to be less risky than equities and when stocks move down, bonds tend to rise: making them the perfect portfolio shock absorber.

You’ll still want to hold income-producing assets. Remember, you still have a long life ahead of you!

Periodically withdraw the interest and dividends from your portfolio to live on, while letting your portfolio grow. The standard withdrawal rate is 4% of your portfolio; this is the rate at which research and studies have shown is unlikely to drain your portfolio. It’ll keep you steady, even if you withdraw for 30 years, but you can work it out backwards to figure out what you uniquely need to live on. Everybody’s different.

Figure out how you will pay your bills

Remember how important it was to write down your income goals for retirement? This is the time where you put your plan into practice. Stitch together all that income like some sort Frankenstein’s monster wallet, and you’ve got a viable plan for paying the bills in retirement.

Also, remember that people are living longer and longer. If you’re reading this and are in your twenties: realize that even if you retire at 65, you’ll likely have 30 years of life left to live – probably more given how technology and advancements in healthcare are going. This should be exciting news – not scary!

Consider moving

Thailand is beautiful this time of year. Actually, Thailand is beautiful any time of year. The point is that your dollars can take you much further in a country like Thailand. If you’re having trouble meeting your retirement goals and don’t think you can maintain the standard of living to which you’re accustomed…then think about moving to a country with a kinder currency. For example, Panama is often known as the world’s best retirement haven and has incredible discounts and benefits for retirees – even foreign ones.

retirement

I’d move for the weather alone.

The Sweet, Sweet Seventies:

Good gosh, you’re in your seventies! How’s it feel?

Hopefully you’re still in great health, and enjoying the sun and Panamanian surf. Every now and then though, make sure to turn an eye towards your finances. There’s still work to be done!

Review your estate

In your forties, the advice was to come up with a plan to protect you, your spouse and your heirs – no matter what might happen to you.

If you have a significant amount of money that you want to leave behind to your heirs, then this is the time to think about some alternative strategies…strategies that might save your heirs the damaging bite of future estate taxes.

Make sure you’ve got your affairs in order. This includes your will, power of attorney, emergency instruction and other important legal mumbo jumbo.

Avoid lifestyle creep

Lifestyle creep is a problem that retirees often face.

When you’re younger, you tend to think that your expenses will be very low once you retire. Why do you think that would be true? You’re retired! You’ve got all this free time to do whatever you want. It only makes sense that you would spend MORE than you did when you were working. When that spending gets out of control, you’ve succumbed to lifestyle creep.

retirement

Turns out that keeping to your budget is just as important now as it was in your twenties…so fight against the lifestyle creep!

Buy Longevity insurance

If you’re feeling as healthy as a horse and are worried that you just might run out of funds as you enter the mid-80s and 90s, you could take out a longevity policy for peace of mind.

Longevity insurance is bit like reverse life insurance. You actually get paid if you live beyond a pre-agreed upon (agreed between you and your insurer) age. For example, you might pay $20,000 at age 73 to receive payments of $11,000 every year starting at age 85 until you die.

Living a very long time can have a strain on your finances. If you’re not prepared, your family’s finances as heirs will have to figure out how to take care of you. For someone who maybe didn’t save as much as they should have and is in excellent health – longevity insurance might be a good play.

To learn more about managing and saving your money, check this course out :)

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