15 Money Lessons All Retirees Need to Learn

As a retiree, it's essential to make smart financial decisions. After all, you may not easily be able to rebuild your nest egg once it's depleted -- if you can rebuild it at all.

The good news is, you don't necessarily have to learn money lessons the hard way. In fact, just read on to find out 15 key things you need to know about managing money after leaving the workforce.

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When you're no longer earning a paycheck, it's important to make sure your money stretches as far as possible. And the place where you choose to retire will impact just how far your dollars go.

In some expensive areas, you'll need a considerably larger nest egg just to cover the basics. If you plan to retire in one, be sure you've got the money to do so.

You don't want to drain your nest egg too fast just because you've selected an area where the costs are high -- so if you have doubts about whether you've saved enough, it's best to relocate somewhere more affordable sooner rather than later.

ALSO READ: 10 States Where Retirees Can Live on Less

If you're counting on Social Security to provide most or all of your retirement income, you're in for a very hard lesson. See, Social Security isn't meant to be your only source of funds. It's going to replace just 40% of your preretirement income, at best, and it's meant to supplement savings and a pension.

If you were anticipating living on Social Security alone, you should look into other options such as delaying retirement to increase your savings or going back to work part-time. If you can't do either, it'll be essential to budget very carefully and choose an inexpensive place to retire.

Although you can't live on Social Security alone, it's still an important source of retirement funds. As a result, it's essential you understand how your benefit is determined.

Specifically, you need to know what your full retirement age is and how your benefit shrinks if you claim before it or increases if you claim after it (up until age 70). If you can't answer these questions, you aren't ready to claim your benefits.

Working part-time in retirement can give you something to do and can boost your income. But if you haven't hit full retirement age yet, it can also mean you temporarily forfeit some of your Social Security if you earn too much.

Your benefits will eventually be recalculated when you hit full retirement age in order to account for money you lost due to working. But you still need to know that taking a job while getting benefits could affect the income you receive so you don't count on getting money the Social Security Administration withholds due to your paychecks.

ALSO READ: Your Guide to Working While on Social Security

If you're married or widowed, you might be better off claiming spousal or survivor benefits in some circumstances. But you need to understand how these benefits work.

For instance, your claiming decision can affect the amount of survivor benefits your spouse receives. In fact, if you claim early, your decision could reduce your spouse's income after you pass on -- especially if you were the higher earner.

You should also know that you may be able to claim benefits based on a spouse's work record even after divorce as long as you were married for at least 10 years.

Be sure to understand all the benefits you're entitled to -- and to strategize with your spouse so you can maximize your combined lifetime benefits and make sure you aren't leaving money on the table.

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Budgeting is especially important as a retiree, as you'll likely have a limited amount of income from Social Security, your pension, and savings.

You need to make sure you have a detailed budget outlining your income and expenses so you don't live beyond your means and end up running out of money too soon or going into debt.

Medicare isn't as simple as many people believe it is. Traditional Medicare comes with many coverage gaps, so you may wish to choose a Medicare Advantage plan or buy Medigap coverage.

You should research your options each year before open enrollment so you can choose a policy that's well matched to your needs. That involves learning what Medicare does and doesn't cover and what your options are to supplement it.

ALSO READ: 3 Essential Medicare Tips for 2021

Even with the right Medicare plan, you can expect to spend money out of pocket on your care as a senior. In fact, 31% of retirees spend in excess of $1,000 per month covering their medical needs.

When you plan how to allocate your retirement funds, it's imperative you work healthcare expenses into your budget. Even if you don't have a lot of care needs now, you should be saving money for future expenses because it's inevitable that your medical needs will increase as you age.

You'll have to start taking money out of your investment accounts in retirement -- but you don't want to take out too much and risk running your accounts dry.

That's why you need to learn about withdrawal strategies and choose a safe withdrawal rate that works for you. This could involve taking out a certain percentage of your account balance every year, withdrawing a lump sum, or adopting a different approach that works best.

The need for emergency savings doesn't disappear when you retire.

In fact, it's more important than ever to have accessible cash set aside for emergencies. That way, when surprise expenses inevitably occur, you won't have to raid your retirement accounts or go into debt to cover them.

Aim to maintain an emergency fund with at least three to six months' of living expenses so you'll be prepared for a rainy day.

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Far too many seniors compromise their own financial security because they do too much to help their children or other family members.

If you're on a limited budget and have only a finite amount of retirement savings, you can't afford to drain your accounts, even to help the people you care about. Otherwise, you could end up with far too little money late in retirement, when you can't make up the shortfall.

It's important to make a plan for how to handle requests, to say no when you need to, and to check your budget carefully before offering financial aid.

ALSO READ: 5 Vital Questions You Shouldn't Put Off Until Retirement

If you have money in certain tax-advantaged accounts, such as a 401(k) or IRA, you'll need to take required minimum distributions (RMDs) starting at age 72. Failure to do so can result in a hefty tax penalty totaling 50% of the amount you neglected to withdraw.

Before you're required to start taking RMDs, learn how they work so you don't end up giving the IRS a ton of your hard-earned money.

As a retiree, it's important that some of your nest egg remains invested so you can continue to earn a reasonable rate of return. But you can't take on too much risk, either, as you may not have time for the market to recover from any downturns.

As a result, it's essential you learn the rules of smart asset allocation. One simple rule of thumb is that you should subtract your age from 110 and put that percentage of portfolio in stocks. But you may want to devise your own risk management strategy as this standard approach doesn't necessarily work in all situations.

In some cases, you may owe federal and state taxes on Social Security benefits. Whether you'll be subject to these taxes depends on where you live and how much your income is.

The state where you live can also affect taxes on other income, such as pension money or 401(k) distributions. Be sure you assess the impact of taxes on your retirement accounts, both so you can budget for them and so you can make informed choices about your domicile as a retiree.

ALSO READ: 3 Ways to Get Through Retirement on Social Security Alone

Finally, you need to learn about your options for covering long-term care. The costs of a nursing home or home care can be astronomical, and as many as seven in 10 seniors end up needing this type of care for at least some time.

Purchasing long-term care insurance is one approach, but you can also try other techniques such as Medicaid planning. The key is to act before you need nursing care so you don't drain your nest egg dry paying for it.

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Whether you're already retired or are thinking about leaving the working world soon, it's important to make sure you've learned all these money lessons.

Once you have, you can make the right choices about Social Security, investing, and withdrawing funds from your retirement accounts so you can have the financial security you deserve in your later years.

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