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Money & Career

5 Things You Should Know About Handling Your Finances for Retirement

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You’ve just hit retirement age, or you’re getting close.

Along with planning trips to spend time with the grandkids and looking into classes you might want to take at your local college, you’ll want to pay some attention to your finances.

GetOld spoke to several top financial advisors on what they think retirees need to know about handling their money. Here are some of the most important things they say you need to consider.

Research your Social Security options. While you can begin claiming Social Security benefits when you reach 62, your monthly benefits will be reduced by about 30 percent. If you were born between 1943 and 1954, full benefits kick in when you reach 66. (The “full retirement age” is a couple of months later with each passing birth year.) However, if you can defer to age 70, says Christine Centeno, a financial planner in Glen Allen, Virginia, your benefits will grow by eight percent each year you wait. “That’s a great return,” she says, “but the decision of when to take Social Security depends on many other factors, such as other sources of income, your investments, and your health.” This benefits planner website from the Social Security Administration provides more information.

Develop a budget. “The best way to ensure that you can add value to your retirement is to live within your means,” says Leslie Tayne, a New York lawyer who specializes in debt management. “This may look different than it did when you were working. Creating a budget and working to stay within it, should allow you to have some room for ‘fun spending.’ You can even make ‘fun’ a line in your budget, but this may mean cutting back elsewhere. Look to see whether you have any excess in your current spending. Maybe you don’t watch all the cable channels you’re paying for, or use as much cell phone data as your plan covers.”

Reassess risk in your retirement accounts.  Take a good look at your investment portfolio and assess whether the amount of risk is appropriate for this stage of life, suggests Brad Creger, a Glendale, California, economist and wealth management advisor. The investment strategy that made sense when you were 30 might not be the right fit at 65. “If you suffer a significant market loss, which means 20 percent or more of your investments within five to 10 years before you retire or 10 to 15 years after you retire,” Creger says, “you face a much greater chance of running out of money.”

Have a cash reserve. “This could be anywhere from one to two years’ worth of expenses,” says Centeno. “In the case the stock market or other investments decline, you won’t have take withdrawals when these markets are down.”

Think ahead when choosing a financial advisor. “If you’re going to work with a financial professional, consider somebody who is ideally 20 or 30 years younger than you,” says Cory Nichols, a Virginia investment advisor who focuses on retirement. “You want them to be working throughout your retirement. The relationship is important, and you don’t want to start over 10 or 20 years in.”

There are many other factors to consider in selecting a financial professional. The Consumer Financial Protection Bureau offers some tips in this guide, among many other resources on planning for retirement you can find on their website.

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