Planning for Retirement? Here are 5 Tips to Manage your Finances


Retirement planning can be quite a burden if you’ve acted upon it too late. That’s why it’s better to begin planning NOW rather than waiting for retirement to take place. If you’re already planning on your retirement and creating a portfolio for financial management, read on to learn how to do it properly.

Tips to Manage Your Finances For Retirement Plans

Planning for your retirement is a multistep process, changing and evolving over time. If you want to have a secure and fun retirement, build a financial cushion, and plan it out earlier. Follow these tips to do so:

1.       Understand the Timing

The first step is to create your retirement strategy, which is initially based on your current age and your expected retirement age. The longer time between now and your retirement, then the higher risk levels your portfolio has.


For younger employees with at least 30 years until retirement, have most of your assets placed to “risky” investments like stocks. There should also be returns of investment which outpace inflation, giving you the chance to maintain purchasing powers when you retire.

The older you get and the nearer your retirement age comes, your portfolio should focus more on income and capital preservation. Your assets should be in securities like bonds, which are less volatile and still provide income, despite less return of stocks.

Next up, break up the retirement plan in various components to help you pay off any current and future debts. Break it up in three periods:

                •             Two years before retirement

                •             Saving and paying for debts and investments

                •             Cost of living in your state

2.       Determine Your Spending Needs

Set realistic expectations about your spending habits after retirement. You shouldn’t be going all out just because you’re out of work, but that doesn’t mean you can’t treat yourself.

Set spending goals for the post-retirement period and have an accurate estimate of any further debt and expenses, from your needs (such as paying for children’s colleges and your groceries) down to wants (like shopping and vacations). The tip here is to never outlast your savings, taking account for everything and still leaving a bit more for “just in case.”

3.       Calculate Your After-Tax Return Rates

After you determine your time horizon and spending needs, next is to calculate your after-tax real rate of return. This will help assess your portfolio’s feasibility, producing the required income to sustain your wants and needs post-retirement.

Avoid setting your expectations too high, as an expected rate return is typically around 5%, depending on your retirement portfolio and income. You should also condor your investment returns, which are typically taxed!

If you’re a bit confused in calculating the return rates after taxes, a financial planning firm can help you out.

4.       Monitor the Risk Tolerance

Regardless of who is in charge of your investment decisions, you need to balance risk aversion and the return goals. How much are you willing to risk to meet your goals? Should you set aside your income to invest in risk-free bonds or your expenses?

Be sure you’re comfortable with any risks you take with your retirement portfolio, knowing what you need and what is merely a want. You shouldn’t also over-manage your portfolio and bail out just because of a small loss!

Don’t micro-manage and react to DAILY stock market news, giving in to the panic and selling if you incur a loss. Markets will go up and down, so your portfolio value will do the same. Instead of pulling out, buy when markets decline, as they may go up sooner!

5.       Keep Updated With Estate Planning

Lastly, look into inheritance planning, which is an important step when creating a retirement plan. You may need more advice from professionals such as accountants and lawyers for this. Make sure that your life insurance is also take accounted for, besides your assets to give away.

With a good estate plan and life insurance coverage, you are ensured that all assets are distributed in the way you wanted it to be. Furthermore, it ensures that your loved ones won’t experience any financial hardships after you pass away. It also avoids expensive and lengthy probate processing and any family feuds over inheritances.

When estate planning, you also have to consider the taxes, seeing which is better and more cost-efficient: gifting benefits or passing it through the estate process. Consult tax advisors to determine what retirement plan that’s best for you based on your investments, returns, and your portfolio. These will also be passed on to beneficiaries after your passing.

Wrapping It Up

Hopefully, these financial management tips for retirement plans helped you out. So don’t wait any longer and begin planning for your retirement now.

Do you have any questions or want to share your own finance tips for retiring? Share it in the comments section below, all your thoughts are much appreciated.

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