5 Smart Money Moves for Retirees

With times as tough as they've been in recent years, it's never been more important to keep your personal finances in good shape. Yet despite concerns that the personal finance industry has a dark side, the indisputable fact remains that by taking action to manage your money, you can make the best of whatever financial situation you face.

Throughout this week, we'll be taking a close look at particular things you can do to shore up your finances. Each day, we'll focus on a different age group and the issues that affect them the most. Today, let's begin by addressing the growing group of those in retirement.

The special challenges facing retirees
Entering retirement is the biggest financial adjustment that most people ever have to make. In an instant, you go from having a stable, secure paycheck to living on nothing but Social Security, perhaps a company pension payment if you're lucky, and whatever you've managed to save over the course of a career. With those fixed resources, you have to figure out how to make ends meet right now while also ensuring your money will last potentially decades into the future.


As tough as that sounds, it's not an impossible task. Here are five ideas you need to follow up on:

Idea 1: Get your Social Security right.
Social Security is quickly becoming the most important income source for retirees, so you want to make sure you make the most of it. Although the temptation to take benefits as early as possible can be overwhelming, delaying your Social Security will boost your monthly payments once you do start taking them. If you're married, keep in mind that your choice potentially has an impact on your spouse as well.

Add the impact of your other investments and income sources as well as taxes, and the thought process for choosing the best Social Security option gets complicated fast. But by following tips like these, you can put yourself in the best position to reap maximum benefits for the rest of your life.

Idea 2: Invest for income and growth.
Retirees have learned the hard way that getting income can be a challenge. With rates on bank CDs and bonds at low levels, retirees have had to stretch to get the income they need, buying dividend stocks and high-yield bonds over safer income investments. ETFs Vanguard High Dividend Yield and Pimco Total Return Bond have become hugely popular in part because of their appeal to income-hungry retirees.

Even if it was motivated by income, the move toward stocks also addresses the need for retirees to think about long-term growth. Consumer stocks Coca-Cola , Johnson & Johnson , and Procter & Gamble all yield more in dividends than their bonds pay in interest, but even more important, they also have long histories of dividend increases and share-price appreciation that will help your income grow while also boosting your retirement nest egg for the later years of retirement.

Idea 3: Time your retirement account withdrawals correctly.
Tax-favored accounts like IRAs and 401(k)s are immensely helpful in building up retirement savings. But they create a challenge in retirement, because they increase your taxable income and can have tax consequences for Social Security and other income.

As you pull money out of your retirement accounts, consult with your accountant or simply pay attention to the tax impact of your withdrawals. That way, you'll get the most out of the money you've squirreled away over the decades.

Idea 4: Consider cheaper housing.
Even after the housing bust, most retirees have a huge part of their wealth locked up in their homes. Complicated strategies like reverse mortgages can help seniors get at some of their home equity, but they avoid the fundamental question of whether you actually need to keep the family home after children have grown up and moved away.

Moving down to cheaper housing can be an excellent way to free up money for other needs. With the housing market rebounding, a trade-down doesn't have to be a money-loser if you're patient.

Idea 5: Check your estate planning.
No one wants to contemplate their own mortality, but if you haven't taken care of basic estate planning by the time you retire, you shouldn't delay any further. Having basic documents like a will and durable powers of attorney to let trusted friends or family members handle your finances if something happens to you are crucial to ensure smooth transitions as you age.

Stay tuned
Be sure to check back later in the week for more advice for investors of all ages. Coming tomorrow: dealing with finances in your final working years.

Dividends are just part of what has made Coca-Cola so great to long-term shareholders, but with the company facing some new threats to its dominance, is Coke a smart buy for retirement investors? We've recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering owning shares in the company, you'll want to click here now and get started!

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance. You can follow him on Twitter @DanCaplinger.

The article 5 Smart Money Moves for Retirees originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Johnson & Johnson, and Procter & Gamble. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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