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You've Saved for Retirement Now What? You've Saved for Retirement Now What?
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5 Essential Steps for Converting Your Assets Into a Lifelong Paycheck

Rebekah Barsch •  September 10, 2014 | Enjoying Retirement

An interesting thing happens when people get close to retirement. In addition to putting as much money as possible into their 'do not touch' retirement accounts, they also start thinking about how to spend the money they've worked so hard to save.

Many don't know how.

Think about your own situation. Retirement probably marks the first time you'll be responsible for creating your own paycheck. When you're young, your parents support you. When you're in your working years, you generally have an employer (or if you're self-employed, you have clients) paying you. But then, in retirement, the dynamic changes. You've got to figure out how to turn your bucket of retirement savings into a steady paycheck that will last a lifetime. And it's not nearly as simple as, "I'll just take the money out as I need it." That's not a retirement income plan. It’s a wing and a prayer.

If your goal is to make your money last as long as you do, consider taking these five essential steps to convert your retirement assets into a lifelong paycheck:

1. Establish a budget for your life in retirement. Visualize the lifestyle you hope to live in retirement, and based on that vision, create a budget. Keep in mind that while some of your expenses may be lower in retirement (if you've paid off your mortgage, for example, or if the kids are out of the house), you may spend more for things like health care or travel. Establish a realistic spending plan that considers both essential (must-have) and discretionary (nice-to-have) expenses.

2. Cover essential expenses first. Essential expenses are things such as housing, food, taxes, health care and insurance. Make sure you can meet those expenses with guaranteed sources of retirement income, such as Social Security, pensions or income annuities.

3. Get expert help managing your money. Two people who retire at the same time with the same amount of money can have two very different experiences, depending on how their retirement income plans are structured. Get help from an expert. An experienced financial professional will consider the impact of taxes, longevity and market volatility when helping you design a plan to make the most of your retirement income.

4. Live up to your end of the deal. I've seen many people develop retirement income plans and then turn around and buy something—like a new boat—that wasn't in the budget. You've got to have the discipline to stick with it. A plan is only as good as its execution.

5. Be willing to adjust. To the extent that you have assets invested in the market during retirement, you may need to adjust your spending plan. If the market takes a nosedive early in your retirement, you may have to cut back on your discretionary spending. On the other hand, if your investments grow significantly early in your retirement, you may be able to lock in those gains and spend more.

Making the most of your money in retirement requires planning and discipline. By taking these five steps, you'll be well on your way to creating a consistent paycheck for yourself long after you leave the working world.

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