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Your Financial Checklist of Things to Do When You Retire
You’ve finally made it to retirement
age! Congratulations! Now it’s time to
take a few smart financial steps so you
can relax and enjoy your new-found
freedom!
Your financial checklist of things to
do when you retire
Those early days after retirement can
be much more complicated than you
might have thought. You had the impression
that the day you handed
back the keys to the office would be
filled with carefree exhilaration, but it’s
crucial to have a financial plan to make
sure your later years are going to be as
enjoyable as you always wished them
to be.
Celebrate!
Of course, you deserve to celebrate a
little. Perhaps throw a party for family
and friends and go away for a week
or two’s vacation to do whatever you
want.
But when you’ve finished with all that,
here are a few things you need to do, if
you didn’t do them already before your
last day at work.
Check your pension and make sure
you have all your documents in order
Your steady paychecks have finished
so your main source of income is going
to be your pension payment every
month. Make sure you know exactly
how much you’re going to receive
every month because that’s all there
is and that you have all those important
documents well organized. Any
lump sums you’ve received on retiring
should be stashed away and invested
and not just thrown into the current account
because they have a tendency
to disappear more quickly than you
can imagine! More about how to invest
this money later on.
Find out about all those freebies and
discounts
Depending on which country you live
in, there may be loads of free things or
discounts you can take advantage of.
These may include public transport,
cinema tickets, restaurant meals, museum
entrance fees etc etc. Always
ask before you pay anywhere and always
have your ID with you so you can
prove your age. Find out about certain
days and times when these discounts
apply and make the most of them!
Check your tax situation
In most countries, pensions are taxable
income. Talk to a good tax advisor and
understand how much tax you’re going
to have to pay so you don’t get a nasty
surprise at the end of the tax year.
Check your health insurance and social
security coverage
This is, unfortunately, going to become
increasingly important as you get older.
If you have a good public health
system in your country this might be
enough, but if you need private health
insurance get a good deal now while
you’re still healthy and don’t wait until
you have problems when it’ll cost you
a lot more.
Mortgage
Hopefully, you’ve paid your mortgage
off a long time ago, but if you still have
a mortgage to pay every month, there’s
a temptation to pay it all off when you
retire. However, mortgages are generally
the cheapest loan you have and
the interest you pay is probably deductible
against your pension income,
so it might be an idea to keep your
mortgage going to reduce your taxes.
Check all this out with your tax advisor
before doing anything rash.
Make a budget
If you’ve received a lump sum, it’s
easy to think you’re suddenly rich but
that money is going to have to last you
(hopefully) a long time. Make a budget
based on your regular monthly pension
income and even try to save a bit out
of that every month so you can afford a
few vacations from time to time. Don’t
use your savings for your monthly expenses.
Bear in mind that now you
have more time on your hands you
might find that your monthly expenditure
goes up instead of down. It’s easy
to get into a routine of going out more,
eating out more and just generally
spending more so make a budget and
stick to it.
Investments
This is a much talked-about subject.
Some people swear by investing in
low-risk bonds which might pay about
3-4% a year before tax, or in dividend-oriented
shares which might pay
about the same. Other people say that,
just because you’ve retired, it doesn’t
mean you shouldn’t invest in growth
shares which might not pay a dividend
but which might go up nicely. After all,
most people’s retirement horizon could
be 20-30 years or more. This is a personal
decision but it might be an idea
to have a blend of investments. It can
also be an idea to have a rental property
although as you get older you might
not have the energy or appetite for all
the management that this entails.
Don’t give large amounts of money
to your children
If you’re in your sixties, the chances
are that your children are going
through the most stressful part of their
lives. They probably have a large mortgage,
young children, their careers
are just getting started and they’re
probably short of money. You may be
sitting on a tidy amount of money in the
bank and there’s a big temptation to
be generous. They might even ask you
for money. Be very careful in this respect
because when you get short are
they really going to help you out? The
biggest favor you can do them is to be
financially independent yourself so you
won’t rely on them in the future.
Make your home retirement-friendly
Think ahead and consider down-sizing
to save on your monthly expenses. Perhaps
move to a house with fewer stairs
or to an area where you don’t need a
car. There’s no obligation to keep running
the large family home for the few
occasions when everyone comes to
stay and where you’re still storing your
children’s junk that’s been in the attic
for the last 20 years. If you’re going to
travel more, it’s probably better to live
in an apartment which will be more secure
while you’re away and the costs
will be lower and more predictable every
month.
Start a small business
If you’re in good health, there’s no reason
you can’t start your own small business.
This could be good fun, it’ll keep
you busy and it’ll bring in some extra
income which will always be useful.
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