Retire Wise | March 2021

March 08, 2021

3 Ways to Boost Cash Reserves in Retirement

How would you pay for an unanticipated home or car repair, medical emergency, or other expense? A recent study indicates that fewer than 4 in 10 Americans have enough savings to pay for an unexpected $1,000 expense in cash. The rest would have to borrow, use a credit card or take out a personal loan.¹ The ability to pay for unexpected expenses without incurring debt is among many reasons why retirees need adequate cash reserves. Cash reserves or emergency savings play a significant role in helping to protect your income and your assets in retirement, by helping you:

Avoid cementing losses that can occur when you draw down on your investment portfolio during a stock market downturn or periods of extreme volatility, to meet your income needs.
Supplement income from sources that may not be performing as well under certain market or economic conditions, such as low-yielding fixed-income investments.
Increase confidence in your ability to meet unexpected expenses without derailing your long-term investment strategy.
Minimize the amount of new debt you take on in retirement, especially high-interest credit card debt, which can erode your income over time.

What If You Haven’t Saved Enough?

The general rule of thumb for cash reserves is to set aside three to six months’ worth of living expenses. How much you will need may differ based on your personal circumstances and lifestyle goals. Whether you need to boost or replenish cash reserves in retirement, there are several ways to do so.

Put a budget in place: Unchecked spending, especially in the early years of retirement, can result in less money later. Following a budget can help to manage spending and reveal opportunities to save more at all stages of retirement.
Save a fixed percentage: If you spend less money each month than you receive from income sources, such as Social Security and a pension, consider setting aside a percentage of what’s typically left over each month and direct that to your emergency fund.
Take advantage of unplanned savings: Redirect any unexpected budget savings into your emergency fund. This may include savings resulting from tax refunds, steep discounts or rebates on items you purchase, a lower-than-expected utility bill, or even savings on groceries or prescriptions. These small amounts can add up over time.

If you have questions about maintaining optimal cash reserves in retirement, call the office to schedule time to talk.

^{1 https://www.cnbc.com/2021/01/11/just-39percent-of-americans-could-pay-for-a-1000-emergency-expense.html}

4 Tips for Managing Your Time in Retirement

After years of juggling competing responsibilities and obligations during your working years, retirement should be a breeze, right? You’ll finally have the time to do all of the things you put on the backburner during your working years, or while raising a family. So, why do so many people find themselves busier than ever and just as stressed as they were in their working years? According to time management experts, managing an abundance of time can be as challenging as managing a scarcity of time because it requires you to prioritize what really matters to you.¹

If you’re looking for ways to create a more intentional life in retirement, consider the following tips:

Create a schedule: Like many people, you may have fantasized about the day you would finally ditch your Day-Timer or delete your electronic calendar. However, even in retirement, you need to establish some sort of framework for how you will spend your days or your week, Otherwise, it’s all too easy for time to pass without even noticing it. To ensure you’re spending your time on the things you want to accomplish, consider making a simple list to remind you of the things you’d like to do each day or week.
Be flexible: Managing your time in retirement doesn’t mean blocking out every minute of the day. In fact, that can have the opposite effect, creating a sense of drudgery, which can increase stress. For example, you might not need to schedule everyday chores, such as grocery shopping, gardening or house cleaning. When it comes to routine tasks, give yourself the flexibility to move a task to another day if you don’t feel like tackling it today, knowing that eventually it will get done.
Set boundaries: While allowing some flexibility in your schedule is important, setting boundaries is also critical. That means recognizing when you’re feeling overcommitted and saying “no” to those who may not be respectful of your time—even if they happen to be close friends or family members. Remember, this is your time to focus on what brings the most meaning and joy to your life.
Pace yourself: In today’s fast-paced environment, there’s a tendency to equate productivity with activity. As a result, giving yourself permission to slow down can be difficult, especially if you were accustomed to a relatively high-pressure lifestyle before you retired. Keep in mind, while busywork may keep you occupied in the moment, it won’t necessarily provide a sense of fulfilment. Once you accept that you don't have to be busy every minute of the day, you can focus on accomplishing the things that are most important to you, at your own pace. That includes spending time doing absolutely nothing—guilt free.

^{1 https://www.kiplinger.com/retirement/601545/9-tips-for-better-time-management-in-retirement}