5 Financial Principles
for Recent Retirees

You might look forward to retirement your entire adult life and still be shocked when it comes. To call it a new season of life feels like an understatement. Everything is different, and it requires an entirely different way of looking at your life and finances.

Here are 5 principles that should change as you move into retirement:

1. Be mindful of withdrawal taxes.

You probably have a variety of different retirement accounts, including IRAs, a 401(k), annuities, etc. But not everyone thinks through the tax consequences of withdrawing from different accounts. If you have not familiarized yourself with the various tax laws that impact different kinds of investments, it can cost you a pretty penny.

Make sure to spend time with a financial advisor looking at your investment portfolio and coming up with the best economic strategy for accessing your retirement accounts.


2. Prioritize your expectations.

It is easy to head into retirement with a lot of fantasies about how much time you are going to spend traveling, visiting the grandchildren, or wintering in Arizona. You probably cannot afford to do it all. You are going to need to come up with some realistic retirement priorities.

It is helpful to sit down and carefully prioritize the things you would like to accomplish in retirement. If you do not, it will be difficult to set realistic financial goals to achieve any of them.

3. Give some thought to your home equity.

When it comes to retirement planning, many financial advisors do not factor in home equity. Since you need a place to live, your home is typically considered a personal asset. But it is a significant aspect of your net worth.

There are many ways to take advantage of your home equity in retirement:

  • Downsize, and invest the proceeds.
  • Find a less expensive place to live, and rent out your home.
  • Sell your house, and move in with your kids.

4. Put off Social Security as long as possible.

There is a pretty big financial advantage to waiting to tap into Social Security. For every year past retirement age that you put off applying for Social Security, your check will increase by 8%.

Say you waited until age 66 to take your Social Security benefits, and they came to $1,000 per month. That is about $250 more than if you started drawing on that pension at 62. If you waited until you turned 70, your monthly check would shoot up to $1,320.

5. Communicate, communicate, communicate.

Some people are more comfortable talking about money than others. But when it comes to retirement, communication is the name of the game. It is essential that couples discuss things like:

  • Budgeting
  • Lifestyle and spending changes
  • Changes in living arrangements
  • Timing of retirement for both parties

It is also incredibly important that both parties know where to find primary financial documents and how to access joint retirement accounts. The last thing anyone wants is to have a lot of unanswered questions while dealing with a sick spouse.

On top of talking about the nuts and bolts of post-retirement living, couples also need to discuss the impact on their children. If you have adult children you are supporting or regularly helping out, will that need to change? Do they need to be empowered to make financial decisions in case of an illness or death?

Do not leave anything up to chance. Isolate the crucial conversations that need to happen, and ensure that they do.

Retirement Should Not Make You Anxious

This stage of life is often called the “golden years,” and it should be. But because people tend to worry about retirement, they avoid the topic. The best way to ensure that retirement is enjoyable is to really dive in and start wrestling with the questions and having the important discussions. That way, you will be able to head into retirement confidently.