Living below your means
Many retirees make an effort to live below their means during retirement. This might be easy because you've already accumulated much of what you want. Luckily for us, society recognizes that retirees need to spend less, and many discounts are available. One unfortunate and necessary exception to living below your means is healthcare, because most people incur the majority of their health-related expenses in the last years of life.
Living below your means doesn't need to mean depriving yourself of a good life. But it does mean getting your needs met through discipline and financial commitment—and a strong dose of ingenuity. Impulsive spending, carelessness, and keeping up with the Joneses will have to become things of the past. Self-reliance may take on a whole new meaning. Whatever method of frugality you choose, it should fit your lifestyle.
If living below your means is a challenge for you, then you may need the discipline of a budget. Fortunately, there are some good budgeting tools available, either as desktop applications or online applications. Even smartphones have them. Some are free, while others are inexpensive. Many of them link with your financial institution to give you a real-time view of your money. Consider one of these to help you keep your finances in order.
It is important to draw down your retirement assets in a sustainable manner. For many retirees, this means a structured method such as an annuity plan, where a fixed amount of money is provided to you periodically out of an existing balance. You may be eligible for a traditional pension benefit that makes monthly payments over your lifetime. If you have a retirement account such as an IRA or 401(k), you can elect to have a certain amount of money or a certain number of shares of stock or mutual funds liquidated and sent to you.
Some investors withdraw a certain fixed percentage of their portfolio value. The so-called 4% solution is one of these methods. It is important to know that any chosen percentage is still subject to a number of risks:
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