How to Manage Your Money After You Retire

Retirement is a pivotal turning point that triggers significant financial changes. The steady paycheck you’ve grown accustomed to will be substituted with income from various sources, including retirement accounts, Social Security and other investments. Managing these different streams of income in retirement is critical to maintaining a comfortable lifestyle. Here’s a step-by-step guide for where to put your money after you retire and how to manage it effectively.

A financial advisor can not only help you plan for retirement but also guide you in managing your finances throughout your golden years. Match with an advisor today.

1. Estimate Expenses and Create a Budget

Planning a retirement budget can help you avoid financial surprises if your expenses end up being higher than anticipated. According to a 2025 Schroders report, ¹ 45% of retirees said their expenses were more than expected and 62% said they have no idea how long their savings will last. 

Developing your budget requires an understanding of what your new lifestyle will look like, and how your expenses may change. A typical retirement budget should account for:

• Housing (including mortgage payments, insurance, property taxes, HOA fees, repairs, and maintenance)
• Utilities
• Food
• Health care (including co-pays, deductibles, and any other expenses not covered by health insurance, Medicare, or Medicaid)
• Hobbies or leisure activities
• Entertainment and dining out
• Travel

Ideally, you’re able to retire without debt but if you still have a mortgage, student loans, auto loans, credit cards, or other debts those need to go into the budget as well.

Keep in mind that your spending levels may fluctuate through your retirement years. Spending levels typically start out higher during the early years of retirement when retirees are more likely to travel and be more active. Consumption typically falls in the middle phase of retirement before rising again toward the end of a retiree’s life as they’re more likely to incur medical expenses and need long-term care.

Also think about how much income you’ll need to replace from your working years. Experts recommend replacing between 55% and 80% of your pre-retirement income with sources like 401(k)s, IRAs, Social Security, income from taxable accounts and other assets. Your income replacement percentage will ultimately depend on your lifestyle, spending expectations and how much money you have.

2. Assess Your Income Sources

You know what you plan to spend in retirement. Now it’s time to figure out how much income you’ll need to cover those expenses. Here are six common sources of retirement income you might have. 

Retirement Accounts

Many individuals rely on retirement accounts such as 401(k)s and IRAs to fund their retirement. These accounts offer tax advantages and can be funded with pre-tax or after-tax dollars, either providing a tax benefit in the year the contributions are made or in retirement when money is withdrawn. They are designed to grow over time and provide a steady source of income during retirement.

However, keep in mind that most tax-advantaged retirement accounts are subject to required minimum distributions (RMDs).These are minimum amounts you’re expected to withdraw yearly, based on your account balance and life expectancy. For those born between 1951 and 1959, RMDs start at age 73. For those born in 1960 or later, RMDs don’t kick in until age 75.

Note that if you don’t take RMDs on time, a penalty applies. The IRS charges an excise tax equal to 25% of the amount you were required to withdraw.

Find out what your first RMD will look like when you turn 73 or 75. Use SmartAsset’s RMD Calculator to plan ahead for taxes and income needs.

Social Security

Approximately 56 million Americans draw Social Security retirement benefits. The amount you receive depends on your earnings history and when you start claiming benefits, but for perspective, the average monthly Social Security retirement benefit was $1,955 as of August 2025.

You can claim benefits as early as age 62, but taking Social Security before your full retirement age, which is 66 or 67 for most people, reduces your benefit amount. Waiting until age 70 to claim benefits, on the other hand, can increase the amount you receive.  Keep in mind that Social Security benefits are indexed for inflation, so they typically increase each year.

Pensions

A pension is a type of defined benefit retirement plan that’s offered by some employers, typically in the public sector and some private companies. With a pension, you receive regular payments in retirement based on your years of service and salary history. Pensions provide a reliable stream of income, but they are becoming less common in today’s workforce.

You may have the option to annuitize your pension or receive it as a lump sum. Annuitizing a pension allows you to receive payments from it on a regular basis, while a lump sum lets you withdraw all the cash at once. Keep in mind that pension payments are typically taxable, regardless of how you choose to receive them. 

Annuities

Annuities are financial products that offer regular payments in exchange for a lump sum or periodic contributions. Once the premium(s) is paid, the annuity company makes payments back to you, beginning on an agreed-upon date. 

An annuity can provide a guaranteed income stream for life or a specified period, depending on the type of annuity. Annuities can be a valuable tool for retirees seeking a steady income source. There are, however, some risks associated with them. For example, if the annuity company is not financially stable it’s possible that it won’t be able to make your annuity payments when the time comes. 

Talking to a financial advisor can help you decide if an annuity is a good place to keep your money in retirement. 

Cash Savings

Cash savings, including savings accounts and certificates of deposit (CDs), can serve as a readily accessible source of funds in retirement. While they may not offer significant growth potential, they provide liquidity and security, helping cover unexpected expenses.

Experts recommend keeping an emergency fund with enough cash to cover three and six months’ worth of living expenses. Retirees, however, may need more. If the stock market slumps, for example, it could expose a retiree to sequence of returns risk. Drawing from a cash account during market downturns can help you mitigate this risk and preserve the value of your investments.

Other Investments

Other investments encompass a broad range of assets and account types, including stocks and bonds held in taxable brokerage accounts, as well as income-generating real estate. You may also be drawn to alternative investments, like private equity, precious metals, art and collectibles. 

Diversifying your portfolio can help balance risk and potential returns. If you’re thinking about keeping your retirement money in any of these vehicles, consider the balance between risk and reward as well as liquidity. A cellarful of wine, for instance, could be quite valuable on paper but it may not do you much good if you’re not able to sell your bottles for cash if you need it. 

3. Balance Income and Growth

The golden rule of retirement is to strike a balance between income and growth in your investment portfolio. After all, the goal is to create a diversified mix of investments that aligns with your financial goals and risk tolerance.

Your investment portfolio’s strategic mix of stocks, bonds and cash is known as your asset allocation. Investing in stocks typically offers the potential for higher returns over the long term but comes with greater volatility. On the other hand, bonds are generally considered more stable and provide a source of regular income but much less growth potential.

As a result, conventional wisdom dictates that your asset allocation should generally be more heavily weighted in stocks the farther you are from retirement and skew more toward bonds and cash as retirement approaches and ultimately arrives.

The Rule of 120 is a simple rule of thumb for finding an appropriate balance of stocks and more conservative assets like bonds. To use this rule, subtract your age from 120. The resulting number represents the percentage of your portfolio that should be invested in stocks, with the remainder allocated to bonds.

For example, if you’re 65 years old, the Rule of 120 suggests that you should have approximately 55% (120 – 65) of your portfolio in stocks and the remaining 45% in bonds. This formula is a starting point and can be adjusted based on your risk tolerance and financial objectives.

4. Withdraw Wisely

Determining how much to withdraw from your various income sources each year is a daunting decision and one of the most crucial ones for managing your finances in retirement. Inflation, RMDs and your expected lifespan will all be crucial considerations in your withdrawal strategy.

Strategies such as the 4% rule, now updated to 4.7% by the rule’s creator, are there as guiding principles, but not guarantees. It’s better to tailor a withdrawal rate based on your individual circumstances, including your savings balance, other income sources, desired lifestyle and life expectancy.

While inflation affects all consumers, its impact is especially felt by retirees. That’s why it’s so important to account for inflation in your budget and your withdrawal plan. If you choose to follow the 4.7% rule, for instance, you’ll withdraw 4.7% of your portfolio in year one but you’ll need to increase your withdrawals in subsequent years to keep up with inflation. Failing to do so could leave you with less money than what your budget requires.

But as we mentioned earlier, your financial needs and goals may evolve during retirement. Consider factors like healthcare expenses, long-term care and potential changes in living arrangements. Flexibility in your withdrawal strategy is vital to adapt to these changing circumstances.

Finally, living longer than expected is a welcome outcome, but it also means that your retirement savings must last longer. To address this, retirees should factor in the possibility of a longer retirement horizon when determining withdrawal rates and potentially withdraw less than they initially expected.

5. Adjust and Rebalance as Needed

Keep in mind that retirement is a life phase that could span several decades. Changes in life circumstances mandate that you revisit and adjust your financial plan. This could be an annual review with your advisor, or whenever there’s a significant alteration in your life or the financial market.

For instance, an inheritance, a house sale, or the onset of a costly health condition may necessitate heavy revisions in your budget, portfolio and withdrawal strategy. You may need to rebalance your asset allocation to manage risk or improve returns. You might decide that certain investments no longer fit your financial goals. Regular reviews can help you make the most of your retirement money, wherever you decide to keep it. 

Bottom Line

Managing your money in retirement involves several elements, from estimating expenses and creating a budget to identifying income sources, balancing income and growth and setting a wise withdrawal rate. It’s an ongoing process that requires you to stay engaged and make necessary adjustments over time.

Retirement Planning Tips

• SmartAsset’s retirement calculator can help you estimate how much income you’ll need in retirement and whether your current assets will eventually be enough. Meanwhile, our Social Security calculator can help you project what your future benefits will be based on when you plan to claim them.
• A financial advisor can help you save and plan for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/zamrznutitonovi, ©iStock.com/PeopleImages, ©iStock.com/adamkaz