A retiree’s guide to money management: 5 personal finance tips


Life as a retiree can be incredibly fulfilling provided it is guarded by secure finances. Most young professionals start contributing towards a retirement corpus early in life in order to have a hassle-free transition into retirement and beyond. Regardless of your current financial situation, having the right retirement plan to abide by will considerably impact your life choices and influence how you manage wealth during this time.

The most significant budget changes occur when you have just retired from work life and are getting accustomed to a whole new way of living. It is likely that your expenses will continue to evolve and change through different phases of retirement. The highest expense takes place in the first few years after retirement after which your spendings will probably settle into a regular pattern before increasing again due to healthcare demands. This is also known as the U-shaped expenditure.

Going from a fixed monthly paycheck to new sources of income like perhaps a monthly pension or savings can seem overbearing to begin with. We have compiled a list of the top 5 money mistakes you must avoid during retirement.

With proper investment planning and accurate budgeting, you can manage your expenses through retirement successfully. Here we have put together 5 personal finance tips to help you tackle money matters with ease as a new retiree:

1.Create a budget

This is perhaps the most basic advice that can be applied across all stages of life and yet remains the most ignored one. While it is good to keep your budget in mind while spending, it becomes even more essential, particularly as a new retiree. Most people assume that they have sufficient savings and a good return on investment in place so they can spend money extravagantly once they retire.

While you may not have that many expenses to cover as you did with a fixed income, your healthcare expenses could vary greatly during this time. Having a definite budget in place will help you establish financial boundaries and make informed monetary choices.

2.Tackle liabilities

If you are behind on loan payments or are yet to clear off debt, the smartest way to manage your finances as a new retiree is to first tackle your liabilities on a priority basis. Consider paying off amounts with the highest interest rate in order to save on unnecessary expenditure later.

If you have additional debt like multiple loans, focus on pre-closing one loan at a time or check if you can consolidate your loans instead. . This can help you stabilize your finances to a great extent before your post-retirement expenses increase.

3.Create a retirement income

If you have been financially preparing for retirement over a period of time, it is likely that you have made some long term investments and may have even contributed a considerable amount towards your retirement funds consistently.

Even so, another way to expand your finances in retirement is to convert your retirement assets into a reliable source of income that can boost your financial security even further. Having a guaranteed source of income through mutual funds, NPS or annuity is much better than making arbitrary withdrawals from your retirement account.

4.Have a proper insurance plan

A good insurance strategy can be an incredibly useful financial tool, especially in times of need. A comprehensive life insurance plan can offer you and your family financial security in the long term whereas setting up a good health insurance plan will help you sail through any medical emergencies and cover costs even amidst rising healthcare prices.

Make sure that you review your medical insurance periodically and opt for a policy that also covers long term care if needed. If you feel like the cover size may be inadequate as per your requirements, consider purchasing a top-up health policy.

5.Become tax efficient

Every penny counts when you are managing finances in retirement, particularly in terms of tax savings. You may end up losing a big portion of your funds in taxes if you do not take the right measures to become tax efficient.

Explore tax-saving instruments such as National Savings Scheme (NSS), Fixed Deposits (FD), Public Provident Fund (PPF) etc. You can also invest in health insurance, life insurance or growth-oriented instruments such as Equity Linked Savings Scheme (ELSS) or mutual funds. The goal is to minimize tax deductions and maximize tax-free returns as much as possible.

If you would like to explore the best investment options for new retirees or would like some assistance regarding money management, you can check out Dezerv, and can get in touch with finance experts who will guide you on streamlining your financial portfolio and maximizing your wealth using the most effective investment strategies.