How To Manage Cash Flow In Retirement

Even though I have been retired for 17 years, hubby kept on working. So, I wasn’t really retired in the sense because somebody in our duo was still bringing in money. I never had to fret about money or cash flow because basically we had money and cash flow constantly streaming in!

Fast forward to today and the eventual has now happened. Hubby has now officially retired; he’s no longer working; he’s no longer bringing in a good-sized salary. Now, I’m officially retired myself along with hubby. This is the point in our lives that we have been planning for. We now have to rely on different income streams of money. We have to learn to live within our new means. We have to comprehend that if we make a money mistake we may not have the fortitude to correct it anytime soon. We have to face the fact that if we don’t handle this real retirement correctly, we could effectively run out of money in our old age!

Wake up call!

Technically, we’re starting over and anew. “Retirement is a milestone and a good opportunity to start fresh,” says Ralph Poirier, vice president of cash management at Fidelity Investments. The clean-slate approach, he says, has the potential to make dealing with finances easier, more efficient, and cheaper if you can consolidate accounts and mitigate fees.

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Right from our new retirement beginning, DH and I have decided and agreed that we are going to forget and forgive ourselves from our past financial indiscretions. This is a new day. This is a new life. I think we have garnered enough financial experience to know what to do and what not to do.

Naturally, of course, I’ve been reading and pounding the pavement and learning how to live within our new financial guidelines. One of the best (so far) articles I have read concerning proper cash flow management in retirement comes from Fidelity Investments (of course) click here.

To start, consider the ways that retirement can change cash flow. Your weekly or biweekly paycheck may be replaced by income from a variety of sources, including Social Security benefits, pension distributions, and annuity payments. Some retirees may even generate income from part-time employment or sales of assets.

Spending patterns will also likely change, reflecting both your new lifestyle and shifting financial responsibilities. When you retire, often nothing is being withheld for state and federal income taxes, so you may be responsible for any quarterly estimated taxes. Likewise, most retirees generally have to pay health care and other insurance premiums directly to the insurance carrier(s). Some retirees may also find they are traveling more or living in dual residences. All these situations can make monthly bill paying even more complicated.

DH and I just sold a valuable asset (vacation home). It was a challenge to figure out what we were going to do with the money and how we are going to make it last. In the ‘before retirement’ days we would have gone out and spent a good chuck of it. We would have taken a very expensive vacation (Italy or Europe), we would have bought ourselves another brand new car (paying cash) and I would have given both my daughters a little cash ‘gift’. No more. Those days are now long gone. No extravagant vacations for us. No more newish cars. The one we are driving now will be driven in to the ground before it will be replaced. We’re done with flipping homes and buying vacation properties. Instead, DH and I jointly sat down at our kitchen table, discussed and planned how our money is going to last us for the next thirty or so years. What do we want, what do we want to accomplish, where do we want to go, how we are going to get there and how we are going to keep our costs low so that we can meet our expenditures till the end of our lives.

The last check we write will be to our undertaker (we want to be cremated) and hopefully, if all goes well, that check will bounce.

Live well and prosper, my friend. Live well and prosper.

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14 comments

  1. Hi Cindi, I read Fidelity’s article and it’s pretty generic and they promote trying to have you consolidate everything with them when you meet with them. I actually have left them. Especially since when Inask the question what have you done for me lately? And their money market accounts interest is abysmal. I like the articles from Fritz at the retirement Manifesto blog much better. I have found a much better way to look at your income stream and I share it if you want me to. Sincerely, Lara

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    • Yes, Lara. Share it with me. My dad loved, loved, loved Fidelity. Made him a multimillionaire. Remember Peter Lynch and the Magellan Fund? Those were the days.
      I await to see what you have to send me. THX!

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  2. Hi Cindi, sorry it’s taken so long to get back to you.. Yes I remember Peter Lynch and Fidelity’s Magellan fund. Only wish In my twenties I had more to invest.
    I have gone through similar stages in the beginning of my retirement 20 years ago my DH was still working for six years and then retired.
    At this Time we had two income streams a pension and savings. I did a flow chart of when other income streams would be added, and how they would increase our income. I knew what my budget was before he retired and calculated what it would be after all of certain categories were eliminated – work related expenses, decrease gas, all the taxes and 401k contribution After I got the absolute needs only budget done I ran a 3% inflation calculation for 35 years and separated this total from my total assets and invested this in a CD ladder. Tracking needs only, my personal inflation ran less then 2%, so I reinvested the difference for the first nine years. I calculated our taxes using the Social Security worksheet in the 1040 instructions, how much of the contributory pension was taxable, what our future RMD from our traditional IRA would be and how this impacts our taxes.Started Roth Conversions to fill up the lowest tax bracket and paid less then 1%in taxes on these funds,
    I divided our total assets by the best case probable age at both our deaths, age 89.. So 35 years. Assets divided by 35. This I rationalize would be our max that we would remove from savings.
    So 18 months into retirement, Leukemia struck, ten months later I buried my DH and started the fight to correct a three million dollar medical bill and pay my correct portion. Which was $7500.
    So with change in pension and expenses I redid my calculations.
    Two years later my Mom died and I inherited some money. I put this money to work. All those dollars and my savings I view as my employees and they need to work hard for their boss.
    I slowly increase lifestyle inflation or discretionary categories but still not more then what my employees make, so I still have not reach my definition of de accumulation. Stopped five years ago tracking a monthly budget when I got my last income stream ( widow’s pension at 60) as a creature of habit its not necessary. I set a goal to save some of this income stream till 66 to make up not waiting to file till 66 to claim and at age 70 to give back the government their money to pay the increase taxes on the RMD.So March 2013 was my tax freedom day! And budget freedom day. Sincerely, Lara

    Liked by 1 person

  3. Part 2: Changes After Age Sixty,
    And, who says you can’t teach an old dog new tricks.
    Now Excess inflation account use to fund Grandkids 529 accounts for Christmas.
    March 2013: Widow pension starts and my goal is to use some for taxes on Roth conversions, add to savings to make up what I would have gotten at 66 and future taxes on RMD. This is Returning to the Government what they give me so nothing out of my assets. I view it as Tax Freedom Day just a reduction of my government check.
    November 2016 Started to take advantage of changing banks for bonuses. $150 grocery gift card and better interest on checking added $150 more for transferring. Better interest on two year CD open at this new branch added $1200.
    Jan 2017 Transfer IRA money to Merrill to get greater benefits from Bank of America To Premier Honors status and a $200 bonus.
    April 2017: Tried ShopRite online ordering and they shop for you with all kind of promotions and digital coupons, $10 to try, plus 5% senior discount, and 3.25% back from Bank America saving 67% on everything paid $106 for $320 of groceries. I would have no problem doing ShopRite Shop at home or Peapod delivery if I couldn’t shop myself. Also created a list of area restaurants that deliver to my home if need be.
    June 2017, Start taking advantage of Travel credit card bonuses that Madfientist featured. Charging already planned Needed Renovations to meet spending requirements. $950 already rewarded and just keeps going.
    Nov 2017. Transferred more IRA money with $1200 bonus if maintained for six months.
    Jan 2018 Transfer checking to a no fee 1.5% interest account.
    February 2018: Started Medicare after having high deductible health plan and maximum allowed HSA contributions for eleven years and this HSA will pay the Medicare premiums for twenty years at least. My necessary budget actually has gone down now.
    March 2018: Have reach my financial goal of March 2013.
    Have to find another goal?
    April 2018: received an offer for 7% bonus from a bank! Unbelievable.
    Sincerely, Lara

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    • Lara, I have to reread this a few times. Lots of very important information in here! I just got 1.75% interest on my checking account, no fees, as long as I leave $25,000 in bank, which is easily covered by my ROTH IRA’s. Also, I got my first Fidelity statement. In 15 days, I made $613 interest. That means a full month has the potential of earning me $1200 a month. I just sat in front of my computer completely floored. I took a chance and it paid off. Literally. This had to be a gift direction from my father. He loved Fidelity. Nick is astounded. We’ll chat more.

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  4. So which bank do you deal with that is giving 1.75%. That is even better then my offer. That is a nice interest check. Maybe Your Dad did steer you right. And what did you decide to invest in at Fidelity? Lara

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    • My own home bank. They went out of their way to accommodate me. When we have lunch, I’ll talk specifics.
      Here’s a weird, funny story. All the while, while I was talking to Fidelity, in my head I thought I was talking to Vanguard. In fact, I had to call because I didn’t want my new account to be confused with an old Vanguard account I had. So The Fidelity guy kept telling me there was no previous account opened by me which I thought strange. It took me a day or two to realize what I had done. When I realized what had just transpired, I knew instantly that it was my father guiding my hand. So strange. So odd.

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  5. Crazy! Trying to pen down exact dates I’ll be in your area the weather has been crazy and my daughter and sil were traveling this week, so helped with taking care of Grandkids. Lara

    Liked by 1 person

  6. Hi Cindi, I hope you have had a chance to absorb the cash flow information. The third part is each year after you get all of your balances in January you divide your total assets by one year less. So in my case, the second year I divided by 34 and this would be the maximum I would use if I needed it. Since my expenses decrease to 57% of our couple budget my pensions more then cover my expenses. So this maximum grows each year because I don’t need to tap the maximum. I also choose not to use the equity in my home now in the calculation. So maybe in the future this will be tapped for home health care or nursing care or it’s the legacy to your family.
    So say I have
    $500,000 Divided by 35=$14,285 each year. So this year, if I have been tapping only all the interest or gain to live on and still had the $500,000 I would divided it by 24= $20,834 would be the maximum
    If you are using all of the interest or investment return that your liquid assets generate at some point to get to zero at both of your demises you will need to start the de accumulation and the assets will start to be used and the interest and investment money generated yearly will start to decrease. Sincerely, Lara

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    • Our social security, pension and a loan repayment from one of our daughters gives us enough income each year to cover our bills. Any extra goes into savings. If we come up short or need extra money for a repair etc, I would take it out of our accumulated savings. Right now, the additional interest I am earning from the investment I made from the sale of our condo is going to provide enough money to travel with some extra left over. I don’t see us ever touching the principal. There will come a time when we either need assisted living or extreme health care. When that time arrives, we will sell our main home.

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    • Lara, I finally had a chance to re-read your comments. I understood them completely! Our monthly bills are very low and easily covered by our Social Security, pension & loan repayment (another 7.5 years to go on that thing. ugh!) Any deficit, health issue, travel desire will come out of our retirement savings. I see what you mean about creating a cap on expenses, and dividing your remaining expected years into the amount to calculate how long it will last. I have to rethink this part. Thanks for the tip!

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    • We really right now, do not need the earned extra income. I am going to let it just keep accumulating and then use it solely for some expensive travel, such as 3 months in Arizona costs $3300 for the RV site and probably $900 in gas each way, plus meals and activities. During the rest of the year I have some other locations I’d like to visit, such as the beach and other NY state parks (Lake George, Lake Placid and Saratoga). But first I’m going to let it just sit for at least 10 or months while it accumulates.

      Like

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