Retirement is something most Americans look forward to, perhaps imagining it will enable them to spend more time doing what they love outside of work, including spending time with family and traveling. It absolutely can be all you dreamed of, but retirement can also come with some bumps, especially when you first sail into it.
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Let’s consider seven financial challenges your first decade of retirement can bring.
Adjusting to a New Income Stream
How you receive income will dramatically change once you seal the deal and retire. Instead of getting a bimonthly paycheck (or whatever you’re used to), you’ll be receiving allocations from your retirement investments and, possibly, taking Social Security benefits. Most retirees don’t make as much as they did in their working years, so you’ll have to acclimate to this new normal and manage your cash flow accordingly.
Downsizing
A great way to save money in retirement is to downsize, which involves moving to a smaller home, possibly in a more affordable location. This is a surprising challenge, however. Though it can save you big bucks in the long run, downsizing can sometimes be difficult to pull off — largely due to the fact that when interest rates are as high as they are now, people are less willing to buy homes. So, your home could potentially sit on the market for longer than you’d like.
Additionally, if you’re purchasing your next home (as opposed to renting), you will also be slammed with high interest rates that could make the move awkward.
Planning for Big Buys
Before retirement, you may have relied on bonuses from work (or working overtime) in order to build up a nest egg for big buys, like new furniture or home renovations. But in retirement, you’ll likely be relying on a fixed income and won’t have the same financial wiggle room that you had while employed. A simple splurge could come with complex financial consequences and you’ll need to be extra efficient with your budgeting.
Filling the Days
Most employees have a pretty rigid schedule. You get up, go to work, spend numerous hours there, and then come home. Free time often appears during evenings and on weekends, but not always. In retirement, you’ll be presented with a vast array of free time — and free time can be deceivingly expensive. You may want to eat out more frequently, indulge in mini vacations and do other activities that cost money. You’ll likely find that budgeting your time will become as important as budgeting your money, lest you risk dipping into your more-important-than-ever-before savings.