Managing Money in Retirement: Tips and Tricks

To be clear, you need to think about retirement savings as soon as possible to turn your old age into golden years. However, even if you have an impressive nest egg, you can't simply let your budget go its way. Managing money in retirement is the key to success and the guarantee of your financial health in case of changing conditions, goals, and priorities.

There can be several scenarios of your retirement. First is when you work with assets you currently possess and need to wisely allocate the money for the expected time of retirement. Another one is when you create a source of passive income in addition to the amount you've saved. Whatever option you choose, below are some tips on how to do it right.

Why Is It Important to Prioritize Managing Finances in Retirement?

Whatever the size of your retirement fund, it can always come to an end before you know it. This can happen if you live beyond your means, overspend, or just spend irresponsibly. Running out of cash while retired is frightening as you may not have a stable source of income during your advancing years.

If you don't learn how to manage your finances in retirement, you may find yourself in a situation where you have no money for your utmost necessities, along with no way to get it. Add here increased medical expenses and a higher risk of various emergencies, and realize how important it is to build good spending habits before you retire.

an elderly man counting his budget in front of the laptop

Tips on Managing Retirement Funds

If you want to ensure a happy old age but don't know where to start, below is some advice on managing retirement funds.

Create a Retirement Budget

First of all, you need to have an idea of how much money you need to cover your living expenses during an estimated retirement period. To do this, you need to be realistic about your retirement needs and determine what expense categories you should pay special attention to. Identify both your fixed and variable expenses, and don't forget about out-of-pocket medical costs, which can be between 30% and 70% of your retirement expenses. By doing this, you can create a monthly budget and find out how much money you need for one year of retirement.

If it is difficult for you to make calculations on your own, take into account the average annual spending on the major expense categories by age, according to the data of the U.S. Bureau of Labor Statistics:


Expense Category

55 to 64

65 to 74

Over 75









Medical Expenses

















Start Your Retirement Planning Early

Having retirement savings can give you peace of mind and prevent financial stress during your golden age. The earlier you start, the lower your monthly contribution can be. Plus, there’s a higher chance to save more money if you start in your twenties or thirties. This way, your savings will be an interest-free alternative to loans for retired individuals, and you will be able to use it to cover your living expenses. Finally, starting to save early will help you manage your budget more efficiently without sacrificing your needs and wants.

There are several ways to start your retirement savings campaign. Let's take a look at some types of retirement accounts you can choose:

  • 401(k) plan. This plan comes in the form of a retirement account that you can replenish with some portion of your paycheck. In most cases, your employer makes this contribution automatically each month. These contributions are not considered taxable income, making this plan tax-advantaged. You're allowed to make tax-free withdrawals after reaching the age of 59 and a half. When you turn 73, there come mandatory withdrawals of the Required Minimum Distributions (RMDs). They are calculated based on your age according to the Internal Revenue Service formula;
  • 403(b) plan. This plan works similarly to 401(k) but is only offered to employees of public schools, charities and some churches;
  • IRA plans. IRAs allow you to build a retirement fund by making tax-deferred investments. There are multiple plans to choose from, such as Roth IRA, traditional IRA, spousal IRA, and more.

Choose The Right Budgeting Strategy

There are multiple strategies designed to help you stay on top of your finances. To choose the one that will work for you, learn more about them and settle on the most appropriate one. Below are some commonly used strategies you can consider:

  • U-shaped budget. This model means that your first and last years of retirement come with the highest spending, while middle retirement expenses are lower. This way, your retirement spending resembles a "U;"
  • The envelope budget. The envelope budget provides for allocating your money between several envelopes for various purposes based on your monthly expenses. Each envelope is a specific expense category, such as food, utilities, rent, entertainment, etc.
  • A 50/30/20 rule. This rule is about spending 50% of your monthly budget on basic needs and utmost necessities, while 30% goes toward your wants and 20% should be put toward savings or investment.

Think About The Ways to Save Money

You'll be surprised how you can cut costs without changing your lifestyle if you take just a few simple steps. All these will help you save while still enjoying your post-retirement years.

Create a Source of Retirement Income

Besides being a responsible spender, it's worth thinking about the ways to make extra cash during your golden age. This will not only give you peace of mind while retired but will also provide you with more financial freedom. Instead of trying to manage what you've already saved before, you will know there will be a steady source of passive income that provides you with extra cash on a regular basis.

How to Make Your Money Grow After Retirement?

If you want to create additional income sources to support you while retired, here are some commonly followed ideas.

Investing After Retirement

Investing is a great way to make your retirement funds work for you. When you invest, you generate income and remain financially secure without limiting yourself to just what you’ve saved. Thus, investing after retirement will help you maintain a regular lifestyle and make your savings last.

However, you need to be wise when choosing an investment strategy. The older you are, the more conservative your investment portfolio should be. To minimize the risk, consider fixed-income investments, such as bonds. Although they come with lower returns, they are also less risky.

Balance Your Portfolio Properly

Professional investors say that it may be quite difficult for people to balance their investment portfolios in a way to maintain sufficient returns and not lose money. Additionally, you need to think about having enough funds for today and tomorrow.

If you find it a problem too, follow the "Rule of 100." This rule will help you understand what portion of your portfolio should be allocated to stocks. All you need to determine the percentage is to subtract your age from 100. This will help you generate income from the portion of your investment portfolio and let the rest grow.

Put off Taking Social Security Benefits

Social Security is a guaranteed income you can receive from a specific age for as long as you live. It can be a part of your overall retirement plan that will support you financially. But it can be a great idea to wait as long as possible to start it. This is because the difference in the amount you'll get can reach hundreds of thousands of dollars. To determine the best time to start, use a Social Security Benefits Calculator.

Consider Rental Income

Renting a house is a great way to finance your retirement needs. This provides an opportunity for guaranteed monthly income. However, this option involves purchasing a second home. Therefore, you will have to work hard while you’re young to become a landlord in retirement.

Other Ways to Get Extra Cash in Retirement

If you're looking for alternative ways to cover your retirement expenses, consider the following options.

Relocate to a Smaller Home

Having a big house is a great option for a big family. But after your children start their own families and move to their new houses, you can finally think about having smaller quarters to meet a peaceful old age. By selling your big house and buying a smaller one, you free up enough money to cover other needs and wants. You can also reduce your living expenses by moving to a quiet retirement community. 

Take out a Reverse Mortgage

A reverse mortgage is a smart solution for sole homeowners who don't plan to move from their place. This type of mortgage is about getting a lump-sum deposit by using a house as collateral. Unlike a traditional mortgage, this loan doesn't require you to make monthly payments. You can repay the money when you leave your house, typically after selling it. The best part of it is that you keep living in your home. 

However, interest rates and other fees associated with a reverse mortgage accumulate each month, increasing your loan balance. This makes your debt amount grow over the loan life.

Consider a Loan for Retired

If you need to address temporary financial issues, there are multiple traditional or alternative loan options to get you by. While traditional lenders set strict income, credit score, or even age requirements, online lenders and fintech services offer loans for retired individuals with relaxed eligibility criteria. But make sure to check your loan terms first. Keep in mind that options with lenient requirements are usually more expensive due to the risk they carry to a lender. 

Bottom Line

If you want to maintain a habitual financial life in retirement, you need not only to create a clear savings plan but also think about future cash management. This will help you face your golden age with confidence. Use the tips provided in the article to manage what you've saved properly and generate more income while retired.


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