retirement planning

So You’re Retired! Now What?

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Get in these 4 habits to keep your financial plans on track.

You’ve crossed the proverbial finish line to retirement. And if you’ve planned carefully and done your homework, your financial plan should practically run itself. Still, you’ll want to check in periodically and avoid some common pitfalls.

Don’t go chasing yield

As you age, the fixed-income portion of your portfolio becomes more important. The goal isn’t maximum income, but maximum preservation—by way of diversification. So put the majority of these holdings into a total bond market index fund. For inflation protection, add TIPS (Treasury Inflation-Protected Securities), keeping them to less than 30% of your bond share. Anyone who has substantial money outside tax-deferred accounts and is in a high tax bracket should consider municipal bonds too. Initially, you’ll also keep 12 months of expenses, plus your emergency fund, in cash.

Every couple of years, trim a few percentage points from your stock holdings and stick the money in bonds and cash. By 75—at which point you don’t need as much growth to keep up with inflation—you should have two to three years’ worth of expenses in a money-market or short-term bond fund.

Do a yearly spending checkup

Before you quit working, you gave yourself a budget. Expect to blow it.

Some experts suggest tracking your spending once annually to keep yourself honest. Check out the budget worksheet on Fidelity’s Retirement Income Planner. Then plug in your assets to see if your spending is sustainable. Chronically going over a 4% inflation-adjusted draw could cause your money to run out, but even if you’ve gone off the rails in a few years, dialing back can make a difference.

Take from all baskets

As you spend down your cash account, you’ll need to replenish it. Minimizing the taxes you incur on portfolio withdrawals will maximize the life span of your savings. Generally, retirees have been advised to tap taxable assets first, because the long-term capital gains rate on them is lower than the income tax rate owed on traditional 401(k) and IRA withdrawals, and because this method allows tax-deferred accounts to continue to grow without a tax bite.

Whether or not the strategy works, however, depends on many variables. Another failing: Once you do transition to drawing solely on tax-deferred accounts, you may be bumped into a higher tax bracket.

While there’s no one perfect system, one smart approach is to be more egalitarian with your withdrawals. Start by balancing any tax deductions you have with withdrawals from tax-deferred accounts, then take the rest of the money you need from taxable accounts.

Never retire your résumé

Keep in mind that a worst-case scenario may necessitate your returning to work. Submitting a CV that hasn’t been dusted off since Y2K won’t do you any favors. So update your résumé now while recent accomplishments are fresh in your mind. Then revisit it once a year to add something, even if it’s volunteer work or leadership in a social club.

Answer this question to get more financial advice tailored to your place on the Road to Wealth:

Do your investments carry high management fees?

  1. I have no idea
  2. I try to pick lower-cost funds when possible
  3. I mostly invest in “no-load” mutual funds
  4. I only invest in ultra-low-fee index funds and ETFs

Read next: If You Want to Retire in 10 Years, Do These 5 Things Now

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