Retirement Planning, Elder Law, and Senior Finance Replacing Your Paycheck in Retirement 10/18/2023 | By Sandra Block For many workers, one of the most unsettling aspects of retirement is giving up the security of a paycheck. A regular paycheck allows you to put your finances on autopilot, with funds deposited directly into checking, retirement savings and other designated accounts. Many workers also set up automatic bill payments, which can help you determine how much you’ll have left over each month and whether you’ll need to cut spending. Financial planners say one of the most effective strategies to get over the fear of losing your paycheck is to replicate that system: Estimate the monthly amount you’ll need for necessities and discretionary expenses, then arrange to have that amount automatically transferred each month (or more frequently if you’d prefer) from your savings to your checking account. For this strategy to work, you need to figure out how much money is required to cover the basics, such as utilities and food, as well as extras, such as travel and extracurricular activities. After you have a handle on what you usually spend, you can decide how much to withdraw from your savings, with the understanding that you can adjust that amount as your lifestyle changes. Related: Overcome Your Fear of Retirement You’ll need to rebalance your portfolio periodically to make sure you have enough in your cash “bucket” to cover your expenses. Ideally, you want to have two years’ worth of expenses in a low-risk account, such as a bank savings or money market account — which is another reason to come up with a good estimate of how much money you need to live on. If this exercise seems daunting and you’re still a year or two from leaving your job, try living for a few months on the amount you think you’ll need after you retire. This exercise often eases the transition to retirement, says Edward Snyder, a certified financial planner in Carmel, Indiana. If one spouse has retired and the other is still working, you can also try what Snyder calls “staggered retirement” — living on one income to see how much of your expenses that will cover. Laura Jansen, a CFP in Scottsdale, Arizona, uses a similar strategy for clients who are reluctant to take the leap into retirement. In the months before their planned retirement date, she transfers an amount equivalent to their paycheck from their investment account to their checking account. “Seeing the money physically appear in their checking account gives them the confidence that they can continue to pay their bills without their day job,” she says. Sandra Block is a senior editor at Kiplinger Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com. ©2023 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC. Read similar articles on Seniors Guide: Adjusting to Retirement Unretirement: Retirees Returning to Work Read More Sandra Block Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.