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Now That I’ve Finally Retired, How Do I Manage My Retirement Funds?

Couple discussing their retirement
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If you’re just stuffing dollars into a 401(k), you have a retirement account, but don’t have a retirement plan.

A retirement plan is not just funding your retirement, but figuring out how to manage your funds while you are working and when at long last you finally do retire, says the article “What do I do with my retirement plan when I retire?” from the Shreveport Times. You need a retirement plan while you are working to know how funds will be spent, which will impact how you should be saving and investing.

There are four strategic functions of money in retirement. If you know what they are, you’ll be able to do a better job of saving.

When you stop working, your income from work does too. Unless you are one of the few Americans retiring with a pension, it will be up to you to translate retirement assets into retirement income. Your first thought might be simply to start with taking out just a little bit, and live on that as best you can. Nope, that’s not a plan. The first question is: what’s is enough to live on, and the second—how long will it last?

Until those questions are answered, the other three can’t even begin to be addressed. Retirement income planning is something that many people do with professionals, because it’s not easy. This is the difficult place, where life planning and money planning meet. How long will you live? No one knows. How long will your assets be able to produce the income you need? Hard to know one without knowing the other. However, there are still ways to plan, so you can enjoy your retirement.

What’s your level of liquidity? These are things that you own that are not cash but can be turned into cash. Money in a checking account? 100% liquid. Funds in investment accounts are fairly liquid, but not as much as cash. Real estate is not liquid, unless you are in a booming market. What about any small business that you own? Probably not as liquid as you think.

There’s also something called “technical liquidity” and “practical liquidity.” Let’s say you are taking all of the interest and dividend interest from your investments but decide you need $50,000. What happens if you take that $50,000 from your investments? The interest and dividends that were being created by that sum are no longer being generated.

Contingencies are the big unexpected costs. The biggest one faced by retirees is long-term care. People underestimate this cost all the time. It’s not just the cost of a nursing home, although that is a huge cost. What about health that declines slowly, over an extended period of time? There will be caregivers who need to be paid, and care services. That can reach $10,000 a month easily in most states.

Legacies are another consideration. If you want to leave behind something for your heirs, or want to fund a cause or service that you are passionate about, will you build that into your retirement funds or your estate plan?

Reference: Shreveport Times (November 30, 2019) “What do I do with my retirement plan when I retire?”

Suggested Key Terms: Retirement Savings, Contingencies, Legacies, Investments, Liquidity, Pensions