The longer you live the more money you will have to spend, or conversely, the more money you should start saving now to prepare for living into your 100s. Modern medicine and the fact that many diseases and illnesses are able to be caught and even corrected early means that many of us are living longer, and in many cases, healthier lives.
If you’re hoping to live to be 100, how will you make certain you can afford it? The time is now to look at your finances and prepare for a secure financial life in your Golden Years. Here are some steps you can take to make sure you don’t outlive your money:
- Take stock of your spending. Scrutinize your spending for the next 30 days. Track where you’re spending and where you might be able to cut back and put that money into a savings account. It may be easier, and paint a more accurate picture, if you analyze three months’ worth of spending and take an average.
- Talk with your CPA to get a snapshot of the amount of money you may need into retirement. Many individuals believe they will spend less money once they’re retired because they won’t have the expenses for food or commuting and other out of pocket expenses; what they don’t plan for is the money spent on hobbies or travel or leisure, now that you have leisure time. You may also see an increase in your family food budget because you’ll be eating more meals at home than in the past.
- Save as much money, as often as you can. Check on your investments and, depending on your age, invest either more robustly or conservatively. Your financial adviser is your best point of contact for your investment planning.
- Take a look at your lifestyle. Are there items you will want to do once you retire that you don’t now? How much will they cost? Are there activities you do now that you won’t once you retire? How much do they cost? If you plan to travel or take up a new hobby you will want to calculate those costs so you can budget for them. You don’t want to look at retirement as “sitting around the house with nothing to do” time you want to enjoy your Golden Years and pursue hobbies and activities you perhaps didn’t have time for while you were working and raising a family.
- Will you be able to afford to live in your own home? Will you need to downsize or even make arrangements to live in a retirement community? What will that cost? Will it make sense for you to invest in long-term care insurance? Talk with a trusted advisor before you make any decisions on this purchase.
- Get your paperwork in order. Don’t wait until you need a power of attorney or a healthcare proxy or a will – by the time you need it, it will be too late. Talk with your attorney and your family and get these papers drawn up early so they are in place in the event of a health emergency when you can’t speak for yourself. While it may be a bit morbid, you may want to put your funeral arrangements in writing and even get them planned so that your family won’t have to wonder at what your wishes would have been.
- Pay off as much of your debt as possible. It’s best to not have to worry about credit card debt or loans with high interest rates, especially when retirement is drawing near and when your income will likely be lower than it was when you were working.
Taking steps to prepare for living to be 100-years-old is best done when you’re younger and in good health!
Going into retirement and having enough money to not only live comfortably but to be able to do the things you’d always dreamed of while you were working is a delicate balancing act. While you’re still employed, you want to be able to enjoy activities and make the purchases you want, but you still need to set enough aside to prepare for your Golden Years.
There is a way to attain a balance so that you can enjoy your working years while still saving enough for your retirement. Here are some of our tips:
- You need to have a plan. You wouldn’t take a road trip without a map, right? If you have to stop and ask for directions at every turn, you won’t know if you’re being steered in the wrong direction until it’s too late. Just as you need a roadmap for a trip, you need a plan for saving and investing (while still being able to spend now) before you take the leap into retirement. Talk to you accountant or financial advisor about your plans for retirement and ask what you can do now to realize those plans.
- When you are investing in retirement you should be planning to preserve your principal. Many retirees want an income that will sustain them for their lifetime and your investments should take that into account. Being conservative in your investments is likely the best way to go as you near retirement age. The time to take risks is when you’re just starting out.
- Whether you’ve operated with a budget prior to retirement, you should certainly have a budget or some sort of spending plan in place when you do retire. Seeing the amount of money you have in savings or in investments may lead you to frivolous spending now. Work out a budget that calculates any taxes you may have to pay, monthly fixed expenses, medical expenses and/or insurance payments. Once you’ve determined those numbers you can begin planning your budget for “fun” and relaxation in retirement.
- Have a backup plan. Regardless of how well you plan, there may still be items that blindside you and force you to rethink your original plans. Health issues, not receiving as much from investments or having higher than planned for expenses can all throw a curveball into your retirement savings. Having a reserve or an emergency fund may help with this – the reserve is something you hope you won’t have to access, but it provides peace of mind in case you do. A reserve fund could be a piece of property, a home that is paid for or even a collectible that could be sold if necessary, it doesn’t necessarily have to be a cash reserve.
- Have a talk with family members about your plans and even your financial situation so they are aware of your hopes and dreams. Protect yourself from falling for some of the get rich quick schemes that are perpetrated on the elderly. You need to have someone on your side that you can trust to help you with your money and investments if the need arises.
Planning for retirement involves not only your cash and finances, but where you will live out your Golden Years as well. Will you age in place or will you be moving into a retirement community? These are all plans that should be discussed with an accountant and your family prior to your retiring.
If retirement age is fast approaching or whether you’re worried about becoming a victim of the economy there are ways to have put money aside that will help you enjoy your Golden Years. Even if you are “behind” in saving for retirement you can start today and build a nest egg.
A recently released study shows that fewer than 40% of workers have $1,000 in in total savings and investments. The study also showed that fewer than 30% of retirees had more than $1,000 in savings and investments. When you consider how long individuals are living, thanks in part to medical advances, you can see why it’s critical that you are saving for your long-term living needs.
Even if you having started saving yet, here are five steps you can take today to begin building a retirement nest egg:
- You don’t need to always buy the latest and greatest. Simply because a new technology or vehicle or pair of shoes is introduced to the market, that doesn’t mean you need to own it … just then. Impulse purchases can be the bane of your savings account. You should weigh all purchases on whether you “need” it or whether you simply “want” it. If it’s not a critical need, then it’s best to delay the purchase.
- If you’re still employed and your employer provides a matching contribution in a retirement account, take advantage of that. Invest in the highest amount that your employer will match – it’s like free money in the bank!
- Make it a practice to save 10-15% of your income. Don’t think that you have to wait until the end of the year and then look at your earnings to determine how much to save. Take your weekly paycheck and deposit 10% of that. Once you’re in the habit, you will not miss that 10% that you’re putting into a savings account. It will become automatic and depending on how much you earn annually you could be saving significant dollars by years’ end.
- If you get a raise, immediately bank it. You’ve been living the past year without that raise in your pocket and if you don’t count on spending it now, you can continue to live as though you hadn’t received a raise. Consider putting any bonuses or tax refunds into a savings account as well.
- Pay off your debts wisely. Consider this: you’re saving 10% of your income but you’re paying credit cards with interest rates of 18-25% percent! You’re never going to get ahead. Pay off the highest interest rate cards first. Find a second job and devote all of the money earned from that to paying off the high interest rate credit cards. Your budget will thank you.
Enjoying life in retirement means many things to many people, but being able to live in the manner to which we have become accustomed is something that all of us want to do. What steps can you take today to make that a reality?
Retirement planning is a life task that individuals need to be thinking about sooner rather than later especially when you consider how high the stakes are to make certain you’re financially secure. Worrying about money is not something many individuals want to worry about in their twilight years, but lack of prior planning sometimes means our aging parents need to make choices between aging safely in place, or having to move in with a family member.
Getting a grasp in financial freedom and addressing money issues early in your working yearsmakes the most sense even though retirement may seem such a long way off that the concept is difficult to grasp.
Here are five steps to take now to make your golden years as enjoyable and financially secure as possible:
- It’s never too late to establish a budget for your retirement. The best way to prepare is to determine how much money you will need to comfortably survive when you retire. Calculate your debts and expenses and weigh it against your anticipated income. Analyze the figures and make changes now, if possible, to address any shortfalls.
- Don’t ignore inflation when calculating living expenses. Your 2013 budget will likely look dramatically different than your 2022 budget. Establishing a budget now is an excellent start, but account for inflation in both income and expenses.
- Don’t be too aggressive in your investments. When individuals near retirement, their first impulse is to become aggressive in investing in stocks. Most financial advisors caution that stocks are one of the most high risk retirement planning methods available. Diversify your investments into various funds and sources to prepare for your assets and check with your financial adviser on how best to distribute your retirement funds.
- You will need to calculate your life expectancy. Bear in mind that there is a 50 percent chance that you or your spouse could exceed the average life expectancy. Make certain you take that into consideration when planning your budget and your savings. Add an addition 10 to 15 years to the amount of time you will live.
- Don’t rely on Social Security to carry you through your golden years. Inflation does play a role in the amount of Social Security an individual receives but the rate of increases in this payment rarely keeps up with inflation. It’s never clear what programs or benefits the government will cut to balance the budget and even though you may have worked to earn the Social Security payment, its receipt is no longer a given.
Setting up a budget and making plans for retirement also includes taking steps to remain healthy and active. If you plan to age in place, it’s also a good idea to take a critical look at the family home and age-proof it for safety. Additionally, when making budgets and plans for aging, consider equipping the home with a medical alert device, these devices can be purchased for pennies a day, but the peace of mind it offers is priceless.