A difficult thing about retirement is that your check, generally received once a month, dictates a change in personal spending. Most people tend to run out of money before they run out of month. You may have to cover the cost of medical, dental, and vision premium coverage. The days of paid vacation and benefits are over.
Be serious about budgeting. Make a list of what you pay. Annual fees such as car insurance, registration, and AAA, AARP, or Sam’s Club fees should be broken down as a monthly payment for your list. Be honest and list everything. Do you have a running tab at a restaurant, bar, or bookie? Write it down.
On a separate page, list your sources of income. Only include contributions from other people in the household if the contribution is solid. Once you have a total, compare the first list with the second to evaluate budget tailoring. Payments to cover first are the life-essential costs, such as rent, power, and food. Become a coupon user, and use a local store that doubles the coupon value.
Consider having State and Federal taxes withheld from your check the first year, to avoid the shock of additional taxes at the end of the year.
The friendly credit card companies may change into piranhas upon your retirement. Terms, credit limits, and opportunities for further credit could be affected. Budget for more than the minimum payment, pay ahead of the due date, and avoid adding additional purchases to your card. Your credit limit may be reduced, which can help you avoid overspending on a retired budget.
Congratulations on taking advantage of your former employer’s IRA/401 plan. You have the option of choosing payments from the plan, rolling it over to another plan, withdrawing everything, or leaving it until you want distributions to start. Remember your contribution was pre-tax. Whatever you take out is taxable, and depending on your age, subject to an early distribution penalty.
Determine what the distribution will be after the tax and penalty (if applicable) are assessed. List the items and the interest/fees value of the debts you plan to eliminate. If the savings are significant, take the withdrawal. If not, request withdrawals on a monthly, quarterly, or annual basis, depending on the plan’s options.
Review your budget regularly. Make changes as needed. Congratulations on your retirement.
Based on personal experience of the author