Our editors carefully select every product. If you buy from a link, we may earn a commission. Learn More.

6 Ways to Protect Your Finances After Retirement

The retirement years might seem very far away now, but they will be here before you know it. Have you thought about how you will protect your finances during this time? Doing so enables you to live a comfortable, stress-free retirement.

Protect Your Finances After Retirement

You’ll maintain your current lifestyle, live wherever you want and travel when you please. Here are six ways to protect your finances after retirement:

Think of What Would Happen If You Divorce

No one wants to consider the possibility of divorce, especially during retirement. However, think and take action now to protect your retirement in a divorce. Sit down with your spouse and talk about what would happen to your finances if you were to divorce. 

Determine who would get what and how you would maintain your living standard. Better still, start the process even before you get married. For instance, get a prenuptial agreement before you walk down the aisle.

Keep updating it as your life and circumstances change. If the worst happens, you won’t have to worry about losing or dividing your hard-earned retirement savings.

Consider a Long-Term Care Policy

70% of people over 65 will require some type of long-term care during their lifetimes. Long-term care is expensive, and Medicare does not cover the costs. A long-term care policy protects your retirement savings from depleting. It is an insurance policy that will pay for the necessary care, whether in-home care, assisted living or a nursing home. 

Choose a policy that best suits your needs and budget. Also, consider how much coverage you will need and for how long. Remember that the sooner you purchase a policy, the lower the premiums.

Review Your Retirement Plan Regularly

Your retirement plan is one of the most important aspects of protecting your finances during retirement. Review your plan regularly to make sure it is still on track. As you get closer to retirement, check whether your investment portfolio is where it needs to be. 

You may need to make some changes to ensure you have enough money saved. Understand how your retirement plan works and keep up with any changes. This way, you’ll be confident your finances are well taken care of.

When you’re retirement plan is not on track, you’ll end up relying on credit cards or loans to make ends meet. It will strain your finances and cause you to rack up debt. Resolve the issue by lowering your current expenditure or creating multiple income streams. Additionally, consult a financial advisor to help you get back on track.

401 (k) and IRA Withdrawals

When you retire, you will most likely want to withdraw money from your 401(k) or IRA. Rules and regulations surround these withdrawals. Know them before taking any money out. With a 401(k), you can start withdrawing money when you reach age 59 1/2, while with an IRA, withdrawals can be as early as age 55.

You will be subject to a 10% penalty if you withdraw money before reaching these ages. Minimum distributions (RMDs) are also required once you reach age 70 1/2. The RMD is the minimum amount you must withdraw from your retirement account each year.

If you don’t take the required distribution, you will be subject to a 50% tax penalty on the amount you should have withdrawn. Knowing the rules surrounding withdrawals from your 401(k) and IRA helps you avoid penalties, keeping more of your hard-earned money.

Make Smart Investments

Some think they need to take big risks to make a lot of money from their investments. However, this is not always the case. You can still make smart investments without taking a lot of risks. 

There are several ways to do this, such as investing in index funds, which track a broad market index. This type of investment is less risky than investing in individual stocks. You can also consider bonds. 

Bonds are loans you make to a company or government. They tend to be less risky than stocks but offer lower returns. Another option is to invest in real estate. It’s a more stable investment, but do research. Whatever investments you choose, diversify your portfolio to spread out the risk.

Build an Emergency Fund

You never know when an unexpected expense, such as a medical bill or car repair, will come up. Have an emergency fund to cover these unexpected costs. You should have enough money to cover 3-6 months of living expenses. 

It may seem like a lot, but you’ll avoid going into debt if you have a financial emergency. Start by saving $500 and then build up to your goal over time. Once you reach your goal, use the money in your emergency fund to pay for unexpected expenses and avoid dipping into your retirement savings.

Enjoy a Comfortable Retirement With These Tips 

Protecting your finances during retirement is important. You don’t want to worry about money when you should be enjoying your golden years. Even worse, you don’t want to outlive your savings. With these tips, you’ll protect your finances and enjoy a comfortable retirement.

Written by Mark Greene

Mark Greene is writer and life coach dedicated to helping men to perform at peak level. He shares dating advice, style tips and strategies for building wealth and success.