7 Simple Tips on How Retirees Can Manage Their Finances

Mar 16, 2023 / Reading Time: Approx. 6 mins

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Retirement-centric financial advice primarily focuses on saving and investing for a comfortable retirement. However, there is not enough guidance on managing money after you have entered your golden years. Irrespective of whether one is retiring early or on schedule, they require expert guidance to manage their nest egg mainly because money management rules undergo a transition as you hang your work boots. However, proficiently managing finances in the post-retirement phase is pivotal to ensuring that the nest egg endures through the golden years without facing any financial struggles or compelling one to resume work.

Here are 7 tips for managing your finances in retirement:

1. Define Your Retirement Goals

A lot of retirees tend to lose their sense of direction and purpose post-retirement. To avoid this, it would be beneficial to make a list of your plans for your golden years. You need to identify the type of lifestyle you want to live during retirement. It could be travelling, pursuing an old passion, moving back to your hometown, or anything! Take note that your retirement dreams will have a significant impact on your finances. By setting clear goals, you can develop a financial plan that aligns with your retirement goals and helps you achieve them.

To manage your nest egg efficiently after you retire, it is necessary to involve your family, especially your spouse, in the process of identifying what kind of lifestyle you want to maintain in your retirement. This will ensure you are considering the needs and desires of those who are living with you in your second inning and making an informed decision.

While your family can provide useful suggestions, it is ultimately up to you to decide how you want to spend your retirement. You have worked hard to fulfil your family's responsibilities, so whatever you choose to do after retirement should bring you a sense of fulfilment.

2. Manage the Expenses Effectively

Managing the expenses effectively can help retirees live comfortable life and ensure they have enough funds to sustain their lifestyles.

To manage the money and keep your expenses in control, make a list of your income sources, such as a pension, income from retirement investments, rent, etc. Also, evaluate your expenses to determine where your money is going. This will give you a clear idea of how much you need to spend and where you can cut back.

Using public transport instead of private vehicles or cab services, seeking out discounts, and bargaining are some of the opportunities where you can save a considerable amount of money on groceries, travelling, clothes, and other necessities. While this amount may feel negligible, such regular savings can make a considerable difference at the end of the month.

One of the major expenses retirees face is healthcare. Staying healthy by eating a balanced diet, exercising regularly, and avoiding unhealthy habits like smoking and excessive drinking can help reduce medical expenses.

Many retirees financially struggle during their retirement even after building a sufficient corpus because they think they have only lived for others and consequently overspend on entertainment in their retirement, which results in the quick depletion of savings. It is advisable to consider engaging in low-cost activities, such as volunteering, walking, attending community events, developing a new hobby, etc.

You should review your expenses to identify any non-essential items or services you can do without, such as subscriptions, memberships, or services that you do not use frequently.

Creating a budget can help you stay on track with your expenses and avoid overspending. Set limits for each category of spending and track your expenses regularly to ensure you are staying within your budget.

8 Simple Tips on How Retirees Can Manage Their Finances
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3. Rebalance Your Portfolio

As a general guideline, as you near your retirement, you should limit your exposure to equity mutual funds and instead opt for schemes that invest in other safer asset classes, like debt and money market instruments and gold. Rebalancing the portfolio will help decrease the number of high-risk assets, like equity, in your portfolio and distribute your funds across different types of funds, including equity, debt, and gold.

However, take note that not all debt mutual funds are completely risk-free. Be mindful of the credit risk the fund manager is taking. It is best to stick to the debt mutual funds that are well-managed and primarily invest in instruments issued by the government and quasi-government.

Apart from the debt mutual funds, you may also consider Bank Fixed Deposits, Bonds, Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizen Savings Schemes (SCSS), and many more financial instruments that are considered less risky, offer a steady return, and help in portfolio diversification.

As you may already know, a Systematic Investment Plan (SIP) is a preferred way to gradually build a retirement corpus, whereas the Systematic Withdrawal Plan (SWP) can create a cash inflow stream after retirement. SWP could be a useful tool for retirees as it provides a regular income to them. You, as an investor, can withdraw a fixed amount from your investment portfolio periodically. SWP is the best way to manage cash flow and avoid selling investments at a low price during market downturns.

Even if you have rebalanced your portfolio before retirement, it is necessary to review it once you are retired and periodically make adjustments to ensure it aligns with your objectives. Reviewing your portfolio regularly will help in reducing risk, optimise returns, and increase the likelihood of achieving your goals.

If you feel stuck at any point, be it reviewing your portfolio or making adjustments to the portfolio, do not hesitate to seek the advice of a financial advisor who can help you make an informed decision. PersonalFN is a SEBI-registered mutual fund investment advisor that can help you understand your risk tolerance and investment goals and provide the required guidance.

4. Cover Yourself And Your Spouse with Adequate Health Insurance

Retirees are more vulnerable to health issues and require quality healthcare services as they age. Frequent medical check-ups, regular medication, potential hospitalisation, and the need for long-term care can be a financial burden, especially when your income has substantially reduced. If you do not have adequate health insurance coverage, these costs can quickly deplete your retirement savings. Hence, it is advisable to buy Senior Citizen Health Insurance Policy for you and your spouse, which takes care of the health requirement of aged people. This will not only protect your retirement corpus from spending on medical emergencies but also give you peace of mind, allowing you to focus on enjoying your retirement.

5. Build a Rainy Day Fund

Building a rainy day fund, also known as a contingency fund, refers to setting aside some money for unexpected expenses that may arise, such as a medical emergency or home repair, among others. It is recommended that you have an emergency fund of either 1 to 2 years' worth of your expenses or 6 to 12 months' worth of your income. It will serve as a safety net to cover several months of expenses in case of unexpected financial difficulties.

Ideally, you should build a contingency fund when you are earning. However, if you have not already done so, it is advisable not to delay further. Having some money set aside for emergencies can help avoid dipping into retirement savings and provide a sense of financial security.

Furthermore, it makes sense to build a rainy day fund even if you have health insurance, as some medical expenses may not be covered or may require a high deductible or co-payment. Similarly, having a contingency fund can be helpful in case of unexpected rejection of health insurance claims.

6. Do Not Stop Planning

Remember that planning is a continuous process that should not stop just because you have retired.

Retirees should continue to review and adjust their financial plans as and when needed, as their financial situation may change over time. For instance, changes in your health status or living arrangements can affect your financial needs and goals. But reviewing your investment portfolio regularly will ensure your investments are aligned with your risk appetite and financial goals.

7. Don't Yet Retire!

I highly recommend reading the book 'Ikigai' if you haven't already. Ikigai, which roughly translates to the 'a reason for being', suggests that individuals should have a purpose or passion that drives them and gives them a reason to get up in the morning. One aspect of the Ikigai concept is that people in Okinawa do not necessarily retire in the traditional sense. Rather, they continue to engage in activities that bring them joy and fulfilment, whether that be work, volunteering, or pursuing hobbies.

Retirement does not necessarily mean a complete cessation of work. You can consider continuing to work or engage in activities that provide a sense of purpose and fulfilment. You can monetise your hobbies, work as a counsellor in your area of expertise, learn about new ways to earn money online, or start a small homegrown business! Working or pursuing other activities can provide you with financial and social benefits while also helping to maintain mental and physical well-being.


To conclude:

Managing finances after retirement is crucial to ensure a comfortable and stress-free life until the very end. Retirement is a phase to enjoy the fruits of your labour and lead a fulfilling life. By following the tips discussed above, retirees can ensure their golden years are full of joy and peace of mind.


KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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