For many of us dreaming about retirement living, the idea of living a simple life, with no worries, comes to mind. Sitting on the porch, sipping tea and reading a book. Getting together with friends to chase that little white ball around the golf course. Or maybe just taking a nap on the beach as you listen to the waves roll in. The one thing most of us aren’t thinking about is worrying about our money. Here are 3 simple things you can do to simplify retirement living and worry less about money.
1. Consolidate Your Accounts – By combining IRA rollovers, old 401ks, current 401ks, and other retirement accounts, you simplify your life in many ways.
First, you have less paperwork when tax time rolls around. This is especially so when you turn 70 1/2 and have to take required minimum distributions or RMDs. Instead of 3 or 4 1099-Rs, you have one. This costs less for your return and is easier to follow and calculate RMDs with.
Another reason to consolidate is that you can manage your accounts more efficiently. If you have a target stock to bond mix of 60/40, you can look up one or two accounts, and know exactly where you stand. This is especially convenient when reviewing your investments against the target portfolio of your financial plan.
The last reason you might consider consolidating is that it’s much better for estate planning. Fewer records to track = less hassle for your spouse or heirs. It’s also easier to change or update beneficiary information when those grandkids finally arrive. While not everyone is thinking about estate planning when they first retire or are approaching retirement, as you know, time flies when you’re having fun. If consolidating your accounts just happens to finish 80% of your estate plan, that’s one less thing to worry about in retirement.
2. Consolidate Your Services – Most people think diversifying their portfolio means having more than one financial advisor. This really means that your finances aren’t focused. You may have one guy trying to max your return, another guy being cautious with taxes, and a third guy worrying about your estate. None of them know what the other’s doing, and it creates a very messy, inefficient financial plan.
Consolidating your services should start with finding a good financial planner. The financial plan is the engine that drives your finances to fund your goals. This plan funds your goals with a target return needed from a mix of investments. It’s not necessarily a portfolio that will give you the highest return. If your goals are funded with a 3% return, you may be taking on too much risk if you’re shooting for a 10% return. In this case, another 2008 might make your plan unfunded. That’s why it starts with the financial plan that asks what are your goals. The plan shows you the allocation needed.
Someone that handles taxes can offer a whole new layer of advice by suggesting Roth conversions at the right time, saving you money in the long run.
Consolidating your financial planning, investment management, and tax services gets all your major areas of finances working together towards a common goal: Simple Living. It may even offer you a break in fees. Usually, the more money you have, the lower the commission or fee percentage.
3. Clean & Downsize – The third thing you can do to simplify your retirement living is clean & downsize. Downsize your lifestyle. Downsize your expenses. Clean your stuff. Cleaning makes room for energy to flow. Think about your home. Is it cluttered? What about your monthly expenses? Can you estimate them all without having to dig through piles of credit card and bank statements? Get rid of extra things that you don’t need. Instead of owning a second vacation home, rent a place. This keeps things simple, lowers expenses, lower taxes, and you’ll have less stuff. You’ll also spend time on vacation, not working on your cottage.
The more simple your life, the more focused you can be when living a life with purpose because you can put all your energy into doing what you love, which may be sitting on the beach, and doing nothing.
