3 Essential Money Lessons for Retirees

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Learning to master your finances is a life-long journey, and just because you've hit retirement age doesn't mean you have it all figured out. In fact, retirees can often be in for a rude awakening if they've ignored their financial situation throughout their lives.

We Fools believe all retirees should have several money lessons down cold by the time they retire, so in an effort to make sure you are on the right track, we asked our team of Motley Fool contributors to share a money lesson they believe is absolutely essential for all retirees to know.

Read below to see what they had to say.

Brian Feroldi: One of the most crucial money lessons everybody needs to learn is how to live within a budget. Learning that lesson is doubly important for retirees as they are usually living off of a fixed income and are unlikely to have the option of reentering the work force to make up for any shortfalls. Without a proper budget in place, they may face the risk of eating into their nest egg at a faster pace than they originally intended, which could lead to big problems down the road when those coffers become exhausted.

Hopefully by the time you're retired, you'll have already mastered this skill, but if you haven't, it's still worth taking the time to learn how. At its core, leaning how to budget comes down to one key principle: No matter what your income is,spend less money than you make.

Spending less than you make will help to build up a buffer against any future financial disaster and will likely bring a sense of calm to an otherwise chaotic situation.

If are able to follow to that one key principle, then the odds are very good that your golden years will remain golden.

Matt Frankel:If you've saved responsibly and have accumulated enough money to retire comfortably, congratulations! However, it's important to use your retirement savings in the right way.

Specifically, since your retirement savings accounts (IRA, 401(k), etc.) are tax-advantage, you want to let the magic of tax-free compounding work for you as long as you can. Therefore, if you have any money saved in standard (taxable) brokerage accounts, it should be used first. These accounts require you to pay taxes on your dividends each year, as well as on capital gains when you sell investments, so it makes sense to use these soon and allow your tax-advantaged investments to keep growing.

Think about it this way -- a 4% dividend yield is effectively reduced to 3.4% after a 15% dividend tax. So, why not leave your highest-paying investments alone as long as possible?

Of course, traditional IRA and 401(k) accounts have minimum required distributions, or RMDs, which kick in when you turn 70 and 1/2, so these should be the next accounts to be used.

Any money you have in Roth accounts should be used last. Not only do these accounts not have any RMD requirements, but they are also the most advantageous for leaving tax-free income to your heirs, making them an excellent estate planning tool.

Sean Williams: My Foolish colleagues above hit on two of what I believe to be the most important money lessons for retirees: learning how to budget and having a retirement plan in place. However, I'd contend that where you retire can be just as important.

For instance, 13 states actually tax your Social Security benefits. If there is some solace here, it's that nine of the 13 states that do tax Social Security income do so only if a retiree makes more than a certain exemption level or threshold. But four states -- Minnesota, North Dakota, Vermont, and West Virginia -- tax every cent of Social Security benefits you earn.

Property taxes can also play a big role. Should you choose to live in Hawaii, you'll pay a mean effective property tax of 0.28%. Choose to retire in New Jersey, and your mean effective property tax could jump to 2.38%. Understandably these figures depends on home values, too (and home values are pretty high in Hawaii), but the point is, many retirees are unaware of the costs they'll incur in retirement that are solely tied to where they choose to live.

Before you retire, you should be aware of how your state taxes retirement benefits, including Social Security, and also understand what sort of property and sales taxes you could be dealing with. Simply choosing a more tax-friendly state could extend the life of your nest egg by years. Don't go into retirement without knowing these potential costs.

The article 3 Essential Money Lessons for Retirees originally appeared on Fool.com.

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