While a retirement wish list might include roaming the world or pursuing a luxurious hobby, the daily realities of paying off a mortgage or funding a child’s education can make it tough to save.
Moving from general concepts to specific retirement activities you think you’ll want to do during retirement, can help you do a better job of saving and planning, advises U.S. News & World Report in the article “Will You be Able to Afford the Lifestyle of Your Dreams in Retirement?” Increased longevity has made retirement a time to begin anew. This requires a different mindset. Regardless of your retirement dreams, you’ll need more funding for a longer retirement.
Here are some pointers to help get retirement savings on track:
What do you want to do? Vague goals like travel may not motivate your savings. However, if you’ve identified the cost of living in Paris for six months, you’ve got a real concrete goal to work toward. That provides more motivation and helps avoid impulse spending. Get specific: write down what you want to do and start researching what it will cost.
Do a test drive first. If your spouse wants to live in an RV full time, that’s great as long as you do. However, don’t sell the house before testing it out. Try renting an RV and living in it for at least a month. The same is true for living in a house in the woods. Sounds great—but if you’re a city dweller, how will you feel after a few months of living in an isolated spot?
Think about how long you want to work. Many people today work into their late 60s and early 70s. If they have a desk job, and they have reached a certain level of success, there may not need to be a cut-off date for retirement. What about taking more time off for vacations or working part time? Recent studies have shown that working even a few more years, can have a major impact on the quality of your full retirement.
Do the math. Once you have some concrete plans in place, run the numbers. Consider how you might make the money you have last longer. Look at housing prices, if downsizing to a less expensive area is on your list. If you plan on travelling, do you have to stay in five-star hotels, or could you be content with Road Scholar, formerly known as Elderhostels?
Remember to include health care costs. You’ll need to include the cost of medical expenses, including Medicare premiums, deductibles, copays and coinsurance, among other costs. This is especially true, if one or both spouses have any chronic conditions.
Now, what’s your savings plan? Once you have all this information, you’ll be able to determine how much you need to save, each year and each month. When you combine all your retirement income sources, do you have enough to sustain your retirement dreams? Or do you need to adjust your savings?
Reference: U.S. News & World Report (Dec. 19, 2018) “Will You be Able to Afford the Lifestyle of Your Dreams in Retirement?”
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