Three tips on how to make a successful shift from saving to spending
When you retire, your focus shifts from saving your money to spending it to pay for the things you need. For many people, this switch from saving to spending is a tough transition; many investors worry they may not have saved enough and want to ensure they don’t run out of money. There are many decisions to make about how much income you need and where that income comes from. Here are three tips to help you make a successful shift from saving to spending.
Make a list of what your living expenses will be in retirement. These are your basic everyday expenses such as the cost of housing, food, transportation, clothing, insurance, taxes and so on. Try to be as thorough as possible and identify everything that you absolutely must have to maintain a good quality of life.
Everything outside of basic living needs fits into the lifestyle section. This category includes the expenses you’ll incur for the other plans you have that aren’t connected with day-to-day living. Having concrete plans and timelines will increase the odds that you will actually do the things that add extra enjoyment to your retirement.
Some may want to leave a legacy where you transfer assets to your heirs or make a charitable donation, either in retirement or as part of your will.
When you work, most of your income likely comes in the form of a paycheque. However, when you retire, your income could come from a variety of sources.
By identifying all of your retirement income sources and the potential amount you will receive from each, you can identify any gaps. If gaps do exist, you will need to reassess your lifestyle and living expenses, as well as your legacy wishes, to better align with your retirement income.
The first two steps help you to plan for the things that are more predictable in your retirement. Taking care of these will help put you in a better position to deal with the things that are less predictable, such as changes to your health. It’s not possible to know what challenges will come our way, but a strategy to deal with the things we can control helps to provide the comfort and confidence to deal with whatever happens next.
This information has been provided by RBC Global Asset Management Inc. (RBC GAM) and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. Please consult your advisor and read the prospectus or Fund Facts document before investing. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. RBC Funds, BlueBay Funds and PH&N Funds are offered by RBC Global Asset Management Inc. and distributed through authorized dealers.
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Regularly increasing the amount you invest is an effective way to build wealth.