7 Tips for a Comfortable Retirement
As certain as we are that retirement will be great, we are faced with a lot of questions and uncertainties once retirement nears. It shouldn’t be that way. Life after work truly can and should be the best time of our lives. Here are some tips for keeping those uncertainties under control.
Visualize – Do you know what your retirement will look like? It seems simple, in order to get somewhere, we need to know where we’re headed. Why not get a mind’s eye view of what life will be like in retirement?
Very few of us take this basic but important step. A poll conducted by Harris Interactive indicated that only one in ten financial professionals said their clients find it easy to visualize their financial dreams.
Take a minute, daydream right now. What is retirement like? Where do you live? What do you do with your time? What gets you going in the morning and what kind of lifestyle do you lead? What toys do you have? Who do you spend time with? What things are out of your reach? Jot down a few of these things, chances are the first thoughts that come to mind will be your most important.
Now that you have an idea of what would make you comfortable in retirement, the next step is to figure out if your finances will support your retirement lifestyle.
Keep Expectations Real – Most of us know that it’s important to throttle back on spending and lavishness once we leave the working world. We need to be prepared for financial challenges and emergencies that can pop up along the way, which can be unexpected and potentially painful. It is OK to splurge of course, but a Hollywood lifestyle is not the objective. Where can you pull back if you have to, and what is vitally important to you?
Know What You Have – You probably look at your brokerage and bank statements and have a good idea of the value of your accounts. That’s a good start. But I would suggest looking a bit deeper into your assets.
Study and understand Social Security and Medicare, learn about enrollment deadlines, benefits and obligations under these plans. Understand where they fall short and come up with a plan to supplement the shortcomings. Analyze your retirement accounts, evaluate the amount of risk you’re taking and question whether that amount of risk is appropriate. Understand the tax ramifications of taking money from your accounts – taxable, tax free or tax deferred. What is your expected pension benefit, and how much of that benefit must be claimed for taxes?
Do The Math – After you have an idea of how you’d like to live your retirement and a good idea of your retirement income you can answer the big question: Can I afford my retirement? Sketch out your monthly expenses. Do a separate list for each month, to capture expenses that are not paid monthly such as vacations, holiday gifts, occasional car and home maintenance and so on. Factor in health care costs. Come up with a contingency plan to get you through the inevitable but unpredictable emergencies. Now compare your expenses to your monthly income and you should have a decent idea of your ability to finance your retirement.
Use a Four Letter Word – If you do the math and come up short you may want to use a four letter word: Work. Many people enjoy keeping a toe in the working world, some only part time and some start new careers and businesses. It’s a great option, and has the benefit of keeping your mind, body and soul active and engaged.
Change is Good – Another way to achieve your retirement vision is to make some positive changes. Downsizing is a common solution, but why not consider a move to a more retirement friendly environment where the climate is good, taxes are low and living is affordable?
Spend your Kids’ Inheritance – We do want to provide for future generations, but it’s your money after all. Everything in moderation of course, but sometimes it is OK to be selfish. If you’re inclined, take that vacation you’ve always dreamed of, stay at the Four Seasons some time. Travel first class. If you’ve always wanted to make a donation to your alma mater or your church, now is the time to do it. Your heirs certainly have their own ideas about money. Do what you want to do, there’s no time like the present!
Keep your Focus – A coach or a mentor can be helpful at any age. Consult with an excellent financial advisor, get expert tax advice, join online or live social groups and keep communication going. Life will continue to have challenges. By keeping yourself “in the loop” with others, you’ll have access to resources you need. And be sure to take a few minutes to review your retirement vision and finances every few years.