It is very frequent (and if it is not so, it should be), that during our active stage we dedicate ourselves with some intensity to plan our retirement. Saving and having private savings to complement our public pension is the best way to guarantee a peaceful retirement and in line with our wishes and needs.
After retirement, another stage opens that we must analyze and plan to properly manage our resources. To get the idea of how you can save your old age financially read further.
From the income side: These are reduced compared to the last salary of our active stage by a percentage known as the replacement rate. This rate will depend on the last active salary and the parameters that determine the public pension.
From the expense side: Normally, after retirement, the expense structure is altered. However, it does not have to be reduced compared to the active stage, because what can happen in many cases is that others replace some.
For example, it may happen that travel expenses are reduced, along with eating meals away from home or buying work clothes. However, at the same time, there are previously non-existent expenses, such as those associated with a new hobby to occupy free time.
How to manage savings?
First, it is very important to preserve savings. Once retired, it is not convenient to maintain a speculative saving profile. We do not have a broad time horizon nor do we have high incomes to recover from a bad investment decision. Therefore, it is essential to select our vehicles to channel these savings, always with a conservative approach.
At this stage, it is not usual to address large financial objectives such as the acquisition of housing or obviously the start-up of a business. However, it may be necessary to address other issues such as helping a child carry out a project or addressing health care expenses.
In this sense, the planning is important and is based on determining the objective and the term, analyzing the resources we have and establishing how we are going to address that expense while being the most reasonable. If the situation allows it, we set aside little income little by little
The increase in life expectancy causes you to live longer as a retiree. Therefore, the savings should last longer. It is important when planning the stage as retirees to estimate our income and expenses and assess whether the rate of decapitalization (if any) is reasonable. Otherwise, it should be assessed if there are superfluous expenses that we should reduce or eliminate.
Inflation is a silent enemy since it makes our money worth less and less. It is important, without contradicting the conservative approach. The objective of covering inflation is not a priority but an aggressive investment objective. It is relatively simple to achieve in environments of moderate inflation.
The best way to manage our stage as retirees is to have criteria when selecting income and expenses (ideally, the latter do not overwhelm the former). The best we can do in advance in our active stage is to gradually create private savings or a self-managed super fund to complement our public pension and enjoy a comfortable retirement.
If you have additional issues, it is always important to go to your bank or financial advisor. It is never too late to start making financial changes, and if it did not occur to you before it was important to do so, this is the time. Here are four tips so you can make the most of your money at this stage:
1. Train yourself financially
The first thing you should do is learn a bit about finance and the tools you have at hand to save a little more and why not, grow your money. Some banks have programs for the elderly, other institutions also provide courses, you just have to find out and find the right option.
2. Start investing
Again, age should not be an impediment. Understand that through several instruments, you could grow your savings to give yourself the odd taste; it will allow you to start investing. One of the easiest instruments to handle is the Term Deposit Certificates. With them, you can deposit the amount you want and not withdraw it until the deadline (for example, one year); when the deadline is achieved, you can withdraw it and collect the winnings.
3. Take advantage of the benefits
There are many places where they offer special rates for retirees. From cinemas, shows, to pharmacies and clothing stores. What you should do is find out which benefit program suits you best and start using it and that is how you can save on your monthly expenses.
4. Don’t try to solve everyone’s problems with your money.
One thing you should remember is that now that you do not work, you should control your income. It does not mean that you can never give yourself a taste, but it also does not have to go through life offering to lend or buy things to others all the time. Now is the time to worry about yourself and start thinking about your finances, dreams, and goals.
Retirement means living without working. It is a stage of life in which, the person for a chronological issue, generally ceased work in a company or organization. He begins to enjoy (in theory) their contributions made during decades of work, or their savings deposited for a certain amount of years in a pension fund. So far, it sounds good, but the truth is that even retirees require careful management of their personal finances.
On paper, the only income a retired worker will receive will be his pension. Nevertheless, beyond that, regardless of the amount of that monthly pension and the mattress that the person has managed to accumulate to face that period, you must consider an important thing.
The retiree will need to put together a budget where you put all your sources of income and expenses. With this, you can keep an efficient control of your money and stick to an elementary rule that does not change even in the third age: always spend less than what you enter.
A person does not choose a single option to keep their money, but rather distributes it into several different risk and return alternatives.
5. Don’t be the one who always pays
This is basically picking up from the previous point. It is, however, important enough to be worth a mention on its own.
As a retiree, you may appear to have more disposable income than young adults or even some adults in their peak working years. In fact, you may genuinely have more disposable income, for now. The key point to remember, however, is that you’re going to have to use that income to support your lifestyle, without work, for many years to come.
This means that you need to keep applying robust budgeting skills just the way you did in your working years. Hopefully, you’ll have enough money to treat yourself and to treat others from time to time. Don’t, however, get into the habit of being the person who always pays. This isn’t fair on you and it isn’t teaching other people financial responsibility.
Set the ground rules (gently) before you go out and be prepared to enforce them (gently) while you are out. Technology can make this easier. For example, you can avoid headaches in a restaurant by using a tool to calculate tips. You can also send payment links to people so they can pay you their share of a bill before you pay the server or cashier.
Speaking of expenses, the final advice for retirees is to avoid excessive disbursements that subtract capital. For those daily or recurring expenses, it is best to use the money they receive as profit. The savings deposited in a financial institution must be allowed to grow and generate profitability.