No matter when you retire, the goal is to enjoy life. One way to do that is to spend less time worrying about money and more time thinking about what you want to do next. Here are some tips for doing that.
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Conduct regular reviews
As you plan for retirement, you can look at actuarial charts to get an idea of the average lifespan for a person your age, and you can check historical data to guess at the interest rate your portfolio will earn. But the further away from retirement you are, the more assumptions you have to make.
When you're living in retirement, there are fewer assumptions to make. You know what's happening around the globe and how likely it is to affect your portfolio. You are keenly aware of your health status and have a clearer sense of how long you might expect to live. The immediate future is not "crystal ball" clear, but it's clearer than it was when you were planning.
Take those immediate insights into account when reviewing your spending and income plan at least once a year. If inflation is high or your portfolio is down, you may need to tighten your belt for the near future.
Regularly revisiting your budget is one way to worry less and exercise a measure of control.
Focus on your "risk capacity"
When you opened your retirement account, you were likely asked about your risk tolerance -- how much risk you can stomach. What you want to focus on now is your risk capacity. Risk capacity is how much of your portfolio you can afford to lose without upending your retirement plans.
To get a sense of your risk capacity, Charles Schwab recommends calculating how much cash you'll likely need in the coming year beyond the funds you have available from guaranteed sources such as Social Security, a pension, or an annuity. Then, conduct the exact same exercise for the next few years of retirement.
This is the amount of money you'll need to cover living expenses in the current economic environment. You'll want to keep this money in an easy-to-access account that also earns interest, such as a high-yield checking or savings account, money market fund, or a certificate of deposit (CD) ladder with staggered maturity dates.
Strategize with taxes in mind
While planning, it's important to consider how your income and subsequent withdrawals will affect your taxes. If you don't already have a tax-efficient strategy for withdrawals in place, now is the time to design one.
This is where a financial or retirement advisor can become worth far more than you pay them. If you work with an advisor who's also a fiduciary, that person can help you develop a strategy of withdrawals that allows your savings to last longer. Because not all investments are taxed in the same way, an advisor can help you take advantage of those different tax treatments, rather than being held hostage to them.
You can't remove all causes of worry from your life, but you can help reduce them by approaching retirement finances with a steady plan in place.
