Financial Advice for Retirement, Social Security, IRAs and Estate Planning

5 Strategies to Simplify Your Retirement Finances

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Most people’s finances are too complicated.

And what I’ve found – after 20+ years of publishing Retirement Watch – is that complicated finances lead to procrastination and stress.

Too much time is spent simply organizing papers and data to figure out where things stand. By then, people are too exhausted to make decisions or implement changes.

If that sounds like your situation, take some time to simplify your financial life.

In addition to reducing procrastination and stress, you’re likely to reduce costs and increase your financial security and independence.

Many financial services firms don’t make it easy to simplify your financial life. They know that most people are busy with other things, so the firms make the process take just enough time and effort to maintain the natural inertia.

But the benefits make it worthwhile to persist.

Make it one of your goals this year to start simplifying your retirement finances. Be realistic about the process. Accept that it will take time to get everything done.

Make a list of the changes you need to make. Then, do some preliminary research to determine exactly what steps must be taken to meet the goals.

To reach this point, you probably have to organize information and documents about your current situation, and then research alternatives.

Finally, list the specific tasks that need to be done and establish a plan for accomplishing them during the year.

Some simple tasks you can do during relatively short periods each week. For more involved tasks, you might need to set aside a half day or more at different times during the year.

It’s often a good idea to set aside a “financial health day” one or more times during the year to knock out either a block of some of the smaller tasks, or a major one.

Here are the areas I find most people need to simplify, improve and refine. Your areas of need might be different, but this list should generate some good ideas.

5 Strategies to Simplify Your Retirement Finances:

Review your bank and financial accounts.

Most people have too many accounts and too many investments. Often, they purchased mutual funds and opened accounts over the years for good reasons, but didn’t monitor them.

Now, they have multiple accounts and funds. Not only are their finances unnecessarily complicated, but they’re missing opportunities to reduce or eliminate fees.

I’m a big advocate of consolidating accounts to one or two firms. It makes decisions and executing them easier and often reduces fees.

For example, if your checking account is at the bank that holds your mortgage, the checking account should be free with no, or a very low, minimum balance.

If you have most of your IRAs and investment accounts at one discount broker, you should have free checking, no annual account fees and other benefits.

You also should be able to link accounts so that if you go to the website, you can log in once and see an overview of all your accounts at the firm. You shouldn’t have to log in to each account separately.

Even if your accounts are fairly well-organized, every few years you should survey what’s available.

Remember, financial firms count on inertia. They often offer good deals to entice customers, then over time either reduce the benefits or don’t keep up with what others are offering.

Ask your current firm if you can get better terms, and then see what others offer.

Reevaluate and shop for insurance.

Most people could improve their insurance. The coverage isn’t optimum, and they’re paying too much for the coverage they receive.

After deciding how to change your coverage terms, compare premiums from different insurers for that coverage.

This can take some time, because I haven’t discovered good websites where you can compare premiums for most types of coverage.

Instead, you have to visit websites of different insurers and contact local agents to receive quotes.

This can be time-consuming, but many people find it pays off with either significant reductions in premiums or improvements in coverage.

Before choosing new coverage, be sure you’re comparing apples to apples. Each quote should have the same coverage limits, exclusions, coinsurance and deductibles.

Manage credit cards.

Payment cards have gone through a lot of upheaval since the financial crisis and enactment of the Dodd-Frank financial services reform.

For example, the rewards programs for debit cards generally were scaled back or eliminated, while credit card rewards programs have improved.

Study the rewards programs for your current cards. Then, manage your spending and finances to maximize the benefits.

For example, some cards give higher rewards for certain types of spending (gasoline, restaurants, etc.) and most place an annual limit on the amount of rewards.

One option is to use each card for the purchases for which it provides maximum benefits. Another approach is to use the card with the most generous rewards exclusively, until you’ve earned the maximum reward points for the year, and then switch to another card.

It also is a good idea to compare the rewards points you earn from a card to its annual fee or other costs. Be sure the rewards you receive exceed any costs.

If you’re ambitious, survey the cards available and consider changing to the one that’s best for you.

Some cards with annual fees can be good for people who charge a lot to the card, especially those who travel frequently, because those cards tend to offer greater rewards and other benefits.

People who charge less to their cards, however, often are better off with no-fee cards that have less generous rewards and benefits.

Refinancing loans.

Take some time to ensure you’re receiving the best deal on your loans, especially first mortgages and home equity loans.

You might be able to refinance to lock in a lower rate or a different loan term. The easy way to do this is to discuss options with your current lenders.

If that doesn’t deliver a better deal, contact other lenders to find the best deal for you.

Automating your finances.

Technology can simplify your financial life. There are many ways to automate saving, investing and paying bills.

For example, recurring bills automatically can be charged to payment cards or deducted from financial accounts.

You avoid late payments and check printing costs, plus you save time. You have more time to analyze and manage your finances and spend less time doing simple tasks.

Automating bill payments also can make it easier to see how much you’re spending and where the money is going.

Visit your bank account on the web and see where the money is going. You also might be able to download the data into an accounting program, such as Quicken, where you can analyze the spending over time.

Of course, there almost always are actions to take on your estate planning and tax planning or restructuring your investments.

We discuss these topics every month and supply plenty of ideas and recommendations. You also might work on some retirement plan matters, such as when to begin Social Security benefits, how much to withdraw from your nest egg each year and the order to draw down different financial accounts.

These are the main areas most people need to work on to simplify their financial lives. You might identify other areas that need improvement.

What’s important is that you identify areas to work on and begin simplifying and improving your retirement finances.

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