IF AMASSING ENOUGH savings to retire is life’s toughest financial task, managing that money in retirement is the trickiest. Consider the juggling act ahead: You need your money to last at least as long as you do, while fending off the threat from long-run inflation and short-term market declines. You also need to be prepared for unexpected expenses—and perhaps the biggest is long-term care, which we discuss in the safety net chapter.
No single financial product will accomplish all of these tasks. Instead, you’ll want to figure out the best combination of Social Security, pension and annuity income, as well as the right mix of stocks, bonds and cash investments. To that financial toolkit, you might add part-time work, long-term-care insurance and the equity in your home.
Once retired, you’ll also have a few other financial tricks at your disposal. For instance, you could temporarily cut back your spending if there’s a major market decline. In addition, as a retiree, you have a great opportunity to manage your annual tax bill. You no longer have a regular paycheck coming in. Instead, you’re creating your own paycheck. Each year, you can decide whether to take money from a taxable source, such as traditional IRAs, or from accounts that won’t have any tax consequences, such as cashing out part of your savings account or Roth IRA. You can read more about this in the chapter devoted to taxes.
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