We spend most of our lives saving and investing in order to become financially independent one day.
So when that day finally arrives – what’s next? What does life after money look like?
In this post, we will be covering what we can do before and during our life after money in order to preserve our wealth and enjoy our lives.
Let’s dive in.
3 Money Moves To Do Before Starting Our Life After Money
Triple Check Our Retirement Calculations
What kind of lifestyle do we want to live? Do we know what the cost of that lifestyle is?
Before starting our life after money, it’s important to double-check our math to make sure that we can afford the lifestyle that we want to live.
The last situation anybody wants to find themselves in is quitting their job only to find out that they are unprepared to move on to the next stage of their life.
We can avoid this by conducting an audit of our finances.
Instead of guessing how much money we will need, we can instead leverage a data-based approach in order to calculate our progress to financial independence.
Additionally, it does not hurt to get a second opinion.
Despite being a finance nerd, I plan to consult with a Certified Public Accountant (CPA) and Certified Financial Planner (CFP) prior to starting my life after money!
Understanding Our Healthcare Situation
In the United States, our healthcare is generally tied to our employment status.
So before deciding to start our life after money, it’s important to have a detailed plan on how we will be covering our healthcare expenses.
Unfortunately, there is no one size-fits-all-approach when it comes to healthcare. Factors such as our age and how much we have already saved greatly impact what the ‘right approach’ is.
Therefore, it’s important to understand the different options available:
- Medicare
- Medicaid
- COBRA
- Affordable Care Act Exchanges
- Private Insurance
- Barista FIRE Employment
No matter what option(s) we choose, understanding how we plan to cover potential healthcare expenses is a difficult but necessary prerequisite prior to starting our life after money.
Creating a Tax Plan
After spending years building up our savings, we will want to make sure that we are getting the most out of our nest egg.
In order to do this, we need to create a tax plan that optimizes our account withdrawals.
This means having a tax plan that answers questions like:
- How much money do I withdraw from each of my different accounts every year?
- How much of my portfolio is in tax-advantaged vs non-tax advantaged accounts?
- What are the taxes and/or fees associated with withdrawing from certain accounts?
Answers to these questions can assist in determining what the best withdrawal strategy is in order to minimize our tax bill.
If you need assistance creating an optimized withdrawal strategy unique to your situation, I recommend working with a CPA.
3 Money Moves To Do During Our Life After Money
Living Within Our Means
When it’s time to start our life after money, it’s more important than ever sticking to a budget.
The easiest way to do this is keeping our big 3 expenses – accounting for 63.5% of all our spending on average – under control.
By focusing our attention on managing our big 3 expenses, we don’t have to stress about reducing our spending in smaller ‘fun’ budget categories (alcohol, traveling, etc.).
Reducing our ‘fun budget’ makes a good headline, however in practice can lead to money dysmorphia
And if we are depriving ourselves, we are doing something wrong.
Adjusting Our Withdrawal Rate
A life after money often means living on a fixed income.
As a result, we need to ensure that our fixed income lasts as long as possible.
We can accomplish this by adjusting our withdrawal rate – the money we withdraw from our investments – based on current market conditions.
If our portfolio is having a stellar year and there is little to no inflation, then we can potentially reward ourselves by withdrawing a little more that year to do something fun.
However, if our portfolio was performing poorly or there was higher than normal inflation, then we might want to consider potentially lowering our withdrawal rate for that year.
Re-balancing Our Portfolio
Much like a yearly psychical, it’s important to schedule a yearly financial check-up.
During this annual exercise, we should evaluate whether or not we need to re-balance our portfolio in order to maintain our preferred asset allocation.
This is important because our asset allocation is a key force that determines the amount of market risk that we are subjecting ourselves to.
As an example, a portfolio that is 90% stocks and 10% bonds is riskier than a portfolio that is 50% stocks and 50% bonds.
Additionally, a life after money focuses more on wealth preservation vs wealth building.
Therefore, we should ensure our asset allocation is optimized to a level of risk that we are comfortable with. Otherwise, a lack of re-balancing can have a potential domino effect on things such as our withdrawal rate.
Final Thoughts – Enjoy Your Life
A life after money means preserving our hard-earned wealth so that we can enjoy our lives to the fullest.
Because at the end of the day, money is just a means to an end.
Whether we are entering a standard or early retirement, it is important to ensure we are doing everything we can to maintain the freedom gained through financial independence.
Is there anything specific you plan on doing before/after transitioning into your life after money?
Thank you for reading! 🙂
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