5 New Year’s Resolutions for New Retirees

Take a step back and plan your retirement future.

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Barbara Friedberg
Barbara Friedberg

Are you newly retired? Are you enjoying the fruits of decades of hard work, raising a family, scrimping and saving? Do you have a nest egg saved up, but are worried whether your finances will survive your retirement?

Regardless of your situation right now, consider putting in place these five resolutions to sleep better at night.

1. Get a total picture of all of your income sources, assets and liabilities. In short, you need to look at your net worth (total assets subtracting total liabilities) and income sources.

It’s much easier not to think about these things. But what happens when you don’t understand your complete financial picture? You become easily derailed by worry and fear. You may ask yourself, “What if my money runs out?” or “What if I can’t afford an emergency expense?”

Getting on top of your net worth and income helps you enjoy your retirement and minimizes money worry. Find out how much money you have saved and your income, and you can plan the lifestyle that fits in with your budget.

But what if you find that your financial picture is worse than you thought?

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You can take action. If your net worth and income aren’t enough to meet your basic needs, you’ll need to find additional income sources. There are always alternatives. Consider a part-time job or move to an area with a lower cost of living. Having lived in numerous places across the country, I know that living in Ohio or Florida is more affordable than Southern California. We chose to raise our child in Ohio and saved much more money than if we’d remained in Southern California.

2. Project annual expenses for the best-case and worst-case scenario. Now that you know your net worth and income, project your expenses for the upcoming year. Start with the minimum amount you need to live and pay for housing, food, utilities, transportation and medical care. After you have the minimum necessities listed, throw in the extra expenses that make life more fun, such as entertainment, travel and dining out. Don’t forget to include an emergency fund for the “what ifs” in your life.

Knowledge is power. If your income and net worth cover your expenses, then you have the peace of mind to go on living within your means. Take action to improve your situation if there’s a disconnect. There are a couple of remedies, including cutting back on expenses, moving to a less expensive home and cooking more at home. If you’ve lived this long, you know what to do. Or you could get a part-time job to earn some extra cash. Renata, a friend of mine who took early retirement and lives near a major port, decided to work part-time at a cruise ship dock. She has income coming in to supplement her retirement income and enjoys her interactions with the cruise ship patrons.

3. Create a spending plan. Make a spending plan. That’s right, even in retirement, you need to plan your spending. Look at your annual projection and set up a spending plan for each category. There are online tools like Mint to help with your plan. Or you can go the old-fashioned route and keep each category’s spending in an envelope and pay cash. When the envelope is empty, you can’t spend any more money in that category.

If there are family members depending on you, now is the time to re-evaluate. Healthy adult children need to be on their own. Don’t put their needs before your own retirement. It’s not good for anyone involved.

4. After money management, integrate mindfulness into your life. I bet you didn’t see this one coming. Obviously, you realize that life comes with an “expiration date.” The only difference between the expiration date on the cold cuts in your refrigerator and your own is that you don’t know your own expiration date.

Don’t overlook the benefit of living longer. According to a 2006 study by Peter Ubel, Healther Lacey and Dylan Smith, “Hope I Die Before I Get Old: Mispredicting Happiness Across the Adult Lifespan,” study participants’ self-reported happiness confirmed an increase in happiness with age. Mindfulness helps you capitalize on your growing wisdom and happiness. Mindfulness is the process of attending to the current experience and living in the present. If you are more consciously mindful, you will learn to appreciate the now, worry less and enjoy life more. If you have enough and you are in control of your finances, living mindfully will elevate the joy in your retirement life.

5. Review your asset allocation and make sure it is in line with your risk tolerance. Now that you’ve evaluated your net, don’t forget to calculate the percent allocated to each asset class. Most retirees are a bit more conservative than their younger selves. This means you probably want approximately equal proportions in stock and fixed asset classes (cash and bonds). After year-to-date returns of 32 percent for the U.S. stock market in 2013, it’s important to check your asset allocation. If the stock portion of your portfolio has grown too large, now is the time to rebalance. Sell some of your stock holdings and reinvest the proceeds into a fixed asset class. Also consider checking out the U.S. government’s floating-rate notes.

Add these New Year’s resolutions to your list and have a wealthy 2014.

Barbara Friedberg, MBA, MS is a portfolio manager, consultant, website CEO and author of “How to Get Rich; Wealth Building Guide for the Financially Illiterate.” Learn more about investing at Barbara Friedberg Personal Finance.