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Wealth Protection and Planning for Retirees Part 2 – Cash Flow Management

Wealth Protection and Planning for Retirees

Cash Flow Management Tips for Retirees

You’ve hit the milestone of retirement! Congratulations! But as you know, those bills still keep coming. They don’t stop just because you’ve retired. The continual stream of expenses is why cash flow management is so important in retirement. Having amassed enough wealth to retire, your distributions from your investments will likely be less than your income was in your peak earning years, which makes keeping track of your spending even more important. Today, cash flow management is our topic, with tips for managing your cash flow so you can enjoy retirement to the fullest.

Have a Budget and Monitor Spending

Having a budget is not optional in retirement. You have to know where your money is going. In addition to a monthly budget, you also need a long-term plan which includes setting aside money for future healthcare expenses and possibly even long-term care needs. Evaluating your insurance needs is another topic we will discuss in an upcoming blog.

Most retirees want to maintain a similar level of luxury they have become accustomed to, but you want to give some consideration to frugality. Frugal living doesn’t necessarily mean depriving yourself. It just involves being intentional and prioritizing your spending. You want to look for ways to save money on a fixed income. One example: don’t be reluctant to accept or even ask for senior discounts. There also are prescription medication discount programs you can investigate. Another place to look for trimming costs is recurring charges. How many paid subscriptions do you watch or read? Even small subscription fees can add up. If you’re not using them, consider canceling them. And especially if you plan to travel, consider automating payments for certain expenses, so you don’t incur late fees.

Once you’ve prioritized your spending, you want to monitor it carefully. In our digital age, there are even downloadable apps you may find helpful as a tool to keep track of your spending.

Your planning should also include an emergency fund. Ideally, you should set aside several months’ worth of expenses you can easily tap into and even several years’ worth within a war chest to help weather market volatility. We will discuss how to properly fund a war chest in next month’s video.

Evaluate Your Living Situation

Especially if you are retired, you may own your home outright, own multiple homes, or have significant home equity. Now that you’ve slowed down from a busier work pace, it could be a good time to look at your living situation. Would downsizing help you be in a better position financially to travel this new road of retirement more successfully? And would a smaller space give you more time to enjoy life and mean less time spent on home care and maintenance? Another consideration is moving to a more affordable community or even another location. There also are many home equity programs that can help you find more cash flow should you need it during certain times or to afford some special things on your bucket list.

Continue to Boost Your Income to Counter Inflation

Most of our clients opt to delay receiving social security income until full retirement age or later when it will pay out more. And, now that you have more time, why not heighten your focus on investing? Continue to invest wisely and look at diversifying your portfolio.

Another thing your retirement planning needs is a strategy to combat inflation, which doesn’t appear to be going away any time soon. Continued investing will help, but you might consider part-time work. Without the pressure of a full-time demanding career, part-time or project work can provide some healthy stimulation, socialization and help to offset inflation.

Establish Financial Guardrails to Protect Your Portfolio

Another strategy to consider is implementing financial guardrails. Financial guardrails are designed to help you avoid portfolio failures. With this strategy, you set upper and lower guardrails for income percentage distribution. If the portfolio performance would cause you to be above or below those thresholds, your withdrawal is adjusted by a previously determined rate, for example, 10%. The strategy can help mitigate the risk of the portfolio running out of money, potentially making it safer to have a more aggressive portfolio at higher withdrawal rates than a standard conservative withdrawal.

If it sounds like managing your cash flow is a moving target, it is. From daily budget needs to longer-term projected expenses, downsizing, and strategies like adding financial guardrails, there are many factors to consider for optimum cash flow. Next time we will discuss why it’s important to establish a war chest and how best to do that.

Chris Zeches is a Certified Financial Planner® and Managing partner at Zeches Wealth Management. Zeches Wealth Management has one singular focus: To financial planning and tax expertise to help multi-generational families and business owners achieve more of what they love. If you have a specific question regarding your situation, please contact us.

Have A Question?

If you have questions that are specific to your family’s situation, feel free to contact us and we will do what we can to help.