You finally have enough money to retire, and you're counting down the minutes—no, seconds—until you walk out the door for the last time. The excitement is palpable, and you can hardly believe you've reached this milestone. After all, it probably took at least thirty years of diligent investing to make your retirement dreams come true.
While I understand why you're probably bouncing off the walls, you still have some work to do if you want to actually stay retired.
Say what?
Yep, you read that right. If you don't complete a handful of important tasks now, you could wind up heading back to work part-time or cutting back on spending just to get by.
To avoid ruining your retirement, you need to make a handful of smart financial moves now. Here are the most important steps to take to keep your retirement safe and on track.
1. Have the "Money Talk" with Your Adult Kids
While giving money to adult kids is a taboo subject nobody wants to talk about, it's actually a lot more common than people think. According to a 2015 study from Pew Social Trends, approximately 61% of parents with adult children in the US admitted to helping them financially within the previous 12 months.
Helping adult kids may not have been a big deal when you were working, but it can make a huge difference to your bottom line once you're on a fixed income. This is why you need to have the "money talk" right away, said North Dakota financial adviser Benjamin Brandt.
"If you are nearing retirement and financially supporting adult children, now would be the time to have some conversations about money," noted Brandt. "Adult children need to know that continued financial support could jeopardize your golden years."
If you set expectations early, your adult kids will have time to learn how to fend for themselves and break the cycle of living paycheck to paycheck.
2. Dial Down Your Investment Risk
Your retirement plan is most vulnerable during the final years leading up to your target retirement date. With that in mind, it's crucial to reconsider your desired level of risk as you start getting close.
"One of the best ways to reduce the risk of outliving your money is to reduce the risk you're taking in your investment portfolio during those last few years," said San Diego financial adviser Taylor Schulte. "This means allocating less to stocks and more to high-quality bonds."
Once you settle into retirement, you can always consider increasing the risk again if it aligns with your long-term goals.
3. Meet with a Financial Planner
Does this sound overly complicated?
"If you think this might be a challenging task, you can always hire a fee-only financial adviser to put together an investment plan for you or use a target date mutual fund that automatically reduces the portfolio's risk as you approach retirement," said Schulte.
And, if you haven't done so already, meeting with a financial planner is probably the smartest move you can make anyway. After all, there is no one-size-fits-all retirement income portfolio or investment approach retirees should take.
A financial planner can find the right mix for your financial goals, however.
"The right mix of stocks, bonds, and other asset classes should be chosen based on the cash flow you need to support the life you want," said financial planner Eric C. Jansen of AspenCross Wealth Management. "One sure way to ruin your retirement is to let your retirement portfolio dictate the lifestyle you have, rather than being properly designed to support the lifestyle you desire."
4. Create a Long-Term Financial Plan
Speaking of meeting with a financial planner, you can rely on these professionals to help you create a long-term financial plan. With a solid plan in place, you won't have to stress over market fluctuations that would normally leave you stressing out.
"We are all emotional creatures," said financial planner Don Roork of AssetDynamics Wealth Management.
It's natural to panic when the market drops, or to feel a surge of happiness and excitement when one of your investments increases in value. In retirement, however, you don't need all that drama. What you really need is a long-term plan that will leave you protected regardless of volatility in the market.
"The next time the market falls and you're convinced that 'this time is different' and 'the financial world is positively collapsing' and 'I'm going to lose all my money,' don't react emotionally and yank all the money out of your well-managed portfolio and move into cash," said Roork.
Leave it to your adviser to worry about your portfolio—that's their job, after all.
"Financial advisers don't have a crystal ball of omniscience into your financial future, but they can skillfully help you evaluate the economic and financial market circumstances, and help you avoid emotion-driven investment thinking and actions that will ruin your retirement," said Roork.
5. Think Long and Hard about Your Long-Term Care Options
While many people believe that long-term care insurance is too expensive to consider, not having a long-term care plan in place can ruin your retirement.
No one ever thinks they're going to need long-term care or have to move to some kind of facility, but more and more individuals are finding out that's not the case, noted Kansas City financial planner Clint Haynes.
Even if you don't think it's ever going to happen, you still have to prepare for it just in case.
"Whether it's purchasing long-term care insurance or setting up steps with your children, a plan needs to be in place," said Haynes. "The costs of a long-term care facility can be exorbitant and the emotional burden on your children can be even more trying. Take the time to create a plan with your family."
And yes, this is another area where you can reach out to a financial planner or insurance professional for help. If the day comes where you need long-term care for any reason, you'll be glad you did.
6. Decide How to Handle Social Security
Failing to plan is the same as planning to fail, and that's especially true when we're talking about Social Security.
"Many couples often opt to take Social Security at the earliest possible age of 62, but this isn't always the best idea," said financial planner Jude Wilson of Wilson Group Financial. The worst part is, most people go this route because they never took the time to compare all their options and potential outcomes.
As Wilson reminds us, taking Social Security early (at age 62) means agreeing to a payout that could be up to 25% less than what you'd get if you waited. If you wait until you reach full retirement age (age 66 or 67, depending on your birthdate), you'll receive the full benefit you worked for.
The lower payout affects more than today's Social Security check noted Wilson. "Future cost of living adjustments will be based on that lower amount. Over your lifetime, the cumulative effect of getting cost of living adjustments on that lower benefit adds up like a snowball rolling downhill in an avalanche."
But, that's not all. Taking Social Security at age 62 can also do harm to a surviving spouse in the future.
"When one spouse passes away, the survivor will receive the higher of the two Social Security checks, not both," said Wilson.
While there are certainly times when an early payout is better, retirees who pick this option without weighing the pros and cons could wind up missing out on huge sums of money over time.
If that won't ruin your retirement, I don't know what will. The good news is that you can start implementing these six financial tips into your planning today and reap the rewards in the years to come. For more information on smart spending decisions in retirement, check out our picks for the best credit cards for retirees.
