Broker Check
Financial Challenges in Retirement

Financial Challenges in Retirement

May 22, 2018
Share |

There are many things to look forward to in retirement, including time and money to spend on your own terms. However, you need to thoroughly plan for how your money is spent and where it is spent.

These looming questions responsibilities can be quite a headache for a lot of people. So what are some common money issues for retirees? What can you do to plan effectively for retirement?

Manage expenses

There might not be a huge change in retirement in your normal spending. Odds are, the few years to a decade before your retirement, your expenses probably started to level off or drop if you paid off your mortgage and/or any other debt. This could free up some money for other things.

At the same time, you probably have more free time on your hands than you did before, this translates to more opportunities to spend that money. More rounds on the golf course, more money spent spoiling your grandchildren, etc.

It's important, during this stage in your life, that you analyze your expenses. Create a new budget (though you should be doing this anyway). List all of your expenses and what you will be bringing in from your various income streams (see more below). Compare the two. Do you have room left for money to spend? Did you spend more than you brought in?

A good budget is reviewed regularly and adjusted accordingly. For more on what makes a good, click here.

Manage cash flow

Now that you've retired from a long career of earning your money on a monthly basis, it's time to figure out where all of your money is going to come from.

Do you have a pension coming from your old employer? How much will you receive in Social Security? What is your plan for your retirement savings? Will you draw down your savings or take advantage of dividend/interest-paying investments? Do you have enough to fund your retirement? Would it make sense to get a part-time job to help with expenses?

These questions need to be answered so you know how much you will have in monthly income. Once you get these questions answered, figure out what you get paid and when and coordinate that with your expenses. If you receive more than you have in expenses, set some aside for emergencies or healthcare expenses down the road.

Keep as much in your retirement accounts as you can. You need that money to continue to grow because you will probably need it for another 30 years or so.

Healthcare expenses

Speaking of income and expenses, do you know how much you will be spending in retirement on healthcare? Fidelity reports that a 65-year-old couple that retired in 2017 will need $275,000 for healthcare expenses. (Source)

While you are figuring out how much you spend and how much you bring in, keep this large figure in mind. Start planning now so you know how will pay for medical expenses down the road.

Tax strategies

With all the possible sources of income in retirement, your tax strategies may change. For example, if you do receive a pension, you, more than likely, didn't contribute to that, therefore, that pension income is fully taxable.

Your retirement savings can be taxed depending if it comes from a Roth vehicle or a traditional vehicle. If from a Traditions 401(k) or IRA, this amount is taxable. If from a Roth 401(k) or IRA, it is not taxable.

Your Social Security benefits may or may not be taxable and that all depends on how much you make and the sources of your income. For more specific information, go to the IRS website.

Philanthropic efforts

Are you feeling charitable? A great way to give back when you are in retirement, but giving your time and energy isn't an option, is donating to an organization that needs it. A wonderful characteristic of donating, besides helping someone in need, is most donations are tax deductible. Make sure, however, that you are keeping documentation of every donation and it's corresponding dollar amount or value.

Keeping accurate records is always a great habit to get into.

Another way to help someone and yourself at the same time is to donate appreciated assets that are held in a taxable account. You avoid having to pay capital gains on the appreciation and give much-needed assistance to someone that needs it.

Estate planning

Estate planning is an easy concept to understand, where do you want your things to go when you pass? The plan to do what you want takes a lot more time and very careful legal planning. The first step in any estate plan should be to have a written will. This will should be accurate and updated regularly. If you have significant assets and/or are worried about family members and what'll happen to your assets, then a trust might make more sense.

In either case, you need to consult with a legal professional to get your things in order. Plan carefully and make sure everything and everyone on your list is taken into consideration when you are making plans.


Finances in retirement go through a dramatic shift. Your income streams change and your expenses change, but it all doesn't have to be bad or concerning. Take stock of what you have and where you want/need it to go. Then, develop a plan with the help of a trusted tax, financial, and legal professional.

Note: This article was written for informational purposes only. Please discuss with a qualified professional about your personal situation. Please do not make financial decisions based solely on what you read or hear.