Imagining what your retirement lifestyle will look like can make it easier for you to plan for the future. While some people envision themselves traveling the world during their golden years, others plan to spend more time with family or even start a new career.
You may also daydream about where you are going to live after retiring. Do you want to move into that mountain house you can’t get out of your mind? Do you want to downsize and live in a swanky city flat? Or are you most interested in staying exactly where you are?
Playing the what-if game may be something you do just for fun, but imagining the possibilities of your retirement lifestyle can actually be a step in the right direction.
Putting together a retirement plan may be overwhelming for some, but like anything else it can be broken down into more manageable chunks. Once you’ve imagined what retirement might look like—say, attending your grandkids’ Little League games on the weekends and sipping sangria in the afternoons—you can work backward to figure out what you need to do to end up there. Make a budget based on your current income and then adjust according to your financial and lifestyle goals for retirement.
For example, you might envision a retirement lifestyle that costs $60,000/year. Over 30 years, that’s $1.8 million—which is a lot of money. However, once you set your number, you can start developing a plan that can help you get there. With that in mind, let’s take a look at five factors you need to consider as you plan for retirement.
How to Think About Retirement
According to the Social Security Administration, a 65-year-old man today will live, on average, until age 84, while a 65-year-old woman will live to age 86.5. What’s more, one out of every three 65-year-olds will live to be at least 90, and one out of seven will live to be at least 95.
Let that sink in. What a full, long life you can live!
Suffice it to say that the odds are in your favor for living longer than ever before, but living the retirement lifestyle you imagine requires a solid strategy. You can start by considering these five important factors.
According to a recent report, 45 percent of baby boomers haven’t started saving for retirement yet. So if you are in that category, you have company.
Conventional wisdom tells us that you should save between $1 million and $1.5 million, or 10-12 times your current income, for retirement, according to the AARP. But everyone’s retirement lifestyle is different; some people might need more, while others might need less.
Either way, you may want to start thinking about how much money you’d like to have as a safety net as you head into retirement. Having money in the bank will give you a better idea of which of those what-ifs could become your reality.
Some people retire and clock out of the workforce. Other people retire and then start a totally new career.
Whichever path you choose, you need to determine how and if you are going to generate income during retirement. For some, dividends, interest payments, and capital gains will suffice. Others might be more interested in collecting regular paychecks—even if that means working at a local coffee shop or golf course for a shift or two a week just to stay busy.
In any event, 41 percent of baby boomers believe that guaranteed monthly income is the most important thing to consider when looking at retirement investments.
3. Social Security
Of course, once you retire, Social Security starts to serve as a source of income.
If you were born before 1960, you can collect your full Social Security benefits when you turn 66 years and two months old. If you were born after 1960, you can collect your full benefits when you turn 67. Continuing the trend, the retirement age will likely increase as time goes on.
Some folks decide to retire early. As a result, their benefits get reduced. For example, someone who retires at 62 will receive only 70 percent of their benefits, while someone who retires at 65 will receive 86.7 percent.
On the flip side, you can delay your Social Security benefits past your retirement age. Currently, a retiree’s benefits will grow 8 percent each year until they turn 70.
Figuring out the best approach to Social Security can be time-consuming. By partnering with a knowledgeable advisor, you won’t have to navigate this complicated situation on your own.
4. Insurance and healthcare
Your healthcare costs will likely increase as you age. While Medicare kicks in when you turn 65, it doesn’t cover long-term care—something that 70 percent of individuals over 65 will need at some point.
Determining how you are going to meet your insurance needs and cover your healthcare expenses during retirement is another major decision you’ll have to make. Remember that your preexisting conditions and current medical expenses won’t go away when you retire—so take good care of yourself, starting now!
5. Retirement accounts and investments
Making sense of the alphabet soup of investment acronyms—IRAs, HSAs, and so on—can seem like a daunting task. To live your retirement lifestyle, you need to understand the differences between these various plans as well as the tax implications associated with each.
For example, while a traditional IRA is funded with pretax dollars, a Roth IRA is funded with post-tax dollars. Which kind of retirement vehicle works best for your specific situation? Talking to a wealth manager can help you determine the best path forward. Learn more about these retirement accounts in our Retirement Planning Guide.
Retirement Plans Are Complex—We Help Make Them Simple
Figuring out how to plan for your retirement lifestyle on your own can be a tricky process. Instead of going it on your own, we always recommend partnering with a trusted financial advisor who can help you build a plan that caters to your unique needs.
In fact, 90 percent of baby boomers who work with wealth managers believe that financial advisors work in their best interest.
It might be your first time retiring, but financial advisors have helped countless people in your shoes. Remember, financial planning isn’t just about money in a single account. It’s about investments, income, annuities, tax planning, insurance, healthcare, Social Security, estate planning, and much more.
To learn how working with a financial advisor can help you plan for your retirement lifestyle, schedule a consultation today. For more on planning for retirement, download our new e-book, The Retirement Planning Guide for People Who Don’t Want to Work Forever.
- How to save for retirement, the options available, and/or when/how to open a retirement account is unique for each individual. A number of factors have to be considered and for this reason it can be a difficult process to find the options that are most beneficial for you. No guarantee or warrantee is made that any of the information submitted or referenced here will be suitable, profitable, or prove successful. Other retirement saving options exist that may be better suited to your individual needs. Please consult a professional, including, a financial, tax, legal and/or human resources professional before implementing anything referenced herein.
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. Always consult a professional Financial Advisor before applying any of the approaches or strategies made referenced directly or indirectly herein.
- The need or type of savings plan or strategy required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the analysis offered, or the strategies referenced here will satisfy your savings requirements. Other saving strategies not referenced in this article may align more to your specific needs.
- Nothing referenced here should be viewed as indicative of actual or expected results. There is no guarantee or assurance that any results, positive or negative, will be achieved or sustained. Actual results may be better or worse than the projections or analysis offered or referenced herein.