Many people include traveling as part of their retirement plans. After all, it’s a great time to do so since there are usually no work constraints and more free time. If you plan on traveling during retirement, you should start thinking about where you want to go and how long you want your travels to be. For example, do you want to spend a month somewhere or just a week here and there? How often you travel and how long can have a big impact on costs and your finances. These are things that should be considered while saving for retirement so that you have enough in your nest egg to cover the costs. It’s also important to remember that travel costs can quickly spiral out of control. Travel, especially international travel, can cost thousands of dollars per trip. Furthermore, sudden costs can also add hundreds of dollars to your trips and vacations. Therefore, it’s important that you make efforts to keep yourself on a budget and to keep travel costs under control. You can do so by doing research on where you travel and by having a plan. Such research can give you an idea of what other travelers went through and how to avoid added costs and expenses. It can also be tempting while traveling to splurge. You know, an extra fancy dinner or two or spending extra money on souvenirs for friends and families. Just like so many other things, these purchases can really add up over time. That’s not so say you can’t spend when you travel, but do so intelligently. That means having a budget and making it realistic and building that budget into the overall picture of your retirement savings. I encourage you to travel if that’s what you want to do during retirement, but I also encourage you to think about those travel costs as you save for retirement so that you can ensure you have enough saved up.
Nobody likes to think about aging. After all, why would you want to think about getting old and all the aches and pains that goes along with it? However, if you want to live a comfortable retirement that’s financially feasible, you need to think about the costs that go along with aging. Growing old can be costly in America. Medical bills can really add up and they become even more unpredictable as you get older as our bodies are unable to recover like they did when we were young and spry. In particular, the costs of long-term care can be quite high and it has become a fairly common medical expense for many retirees. Long-term care includes both rooms at nursing facilities as well as having a private nurse or aide visiting daily to help care for you. Private nursing facilities can be costly, with a full year’s costs being upward of $60,000-$70,000 dollars as can visiting elder care services. Furthermore, you may find that you could require such care for years, thus making it a six figure expense. With all that in mind, you should think about whether long-term care will be a part of your future and how you plan to pay for it. You should look at your retirement goals and think about how a $150,000-$250,000 expense might fit in. Do you have enough saved to cover that? Do you need to adjust your goals to fit it into your retirement plans? It’s never to early to think about such a costly expense. No, you probably won’t be able to determine a set price for long-term care well in advance, but you might be able to do some research and learn what average costs are in your area (or the area you plan to retire to). Once you have such info, take the time to look at your retirement goals and savings and see where you might need to make changes. If you need help with doing so, you can always reach out to a certified financial planner or retirement expert. Is long term-care a part of your long term plans?
You may not realize it, but insurance can be an important part of building up your wealth. Think about it for a moment. Insurance helps to protect your assets and your health and allows you to avoid having to spend tons of money should anything happen to your assets or health. For example, sudden health emergency–such as something as common as a broken bone–can be quite expensive and really eat into your savings and can be difficult to recover from. However, if you have health insurance, that amount coming out of your pocket is reduced based on your premium and the impact on your finances is lessened. In looking past your health, insuring your assets (i.e. your home and car), can do the same thing. A car accident or a storm that causes damage to your home can be just as expensive as a medical emergency. Now, chances are you are well aware of the importance of insurance and, if you are a responsible adult and consumer, you’ve already insured your property and health. But it’s important to realize–and for me to reiterate–that by having insurance, you are also insuring your wealth. You are taking an important step towards protecting the nest egg and the money you’ve saved by making sure it doesn’t get sucked into an emergency expense. You are making sure that some of the costs of life don’t take away from the hard work you’ve done of saving for your present and future. Of course, if you realize that you don’t have insurance or your insurance is lacking, don’t worry. Take the time to either purchase the insurance you need or look into changing your level of coverage.
As you move through your career towards retirement, you will inevitably spend time planning for the future. As part of that planning, you should make sure to take advantage of the IRA “sweet spot” that exists between ages 59 1/2 and 70 1/2. What makes that time period so sweet? Well, for starters, you can start taking distributions from your IRA and not get hit with a early distribution penalty. Now, you will have to pay taxes on that money, but nothing more. You are not required to take money out during that period, but it’s an option. It’s also a great time to consider converting a traditional IRA–if you have one–into a Roth IRA, which can give you even more control over your retirement funds. Remember, a Roth IRA does not come with required minimum distributions (RMDs), which means you don’t have to start taking money out when you reach age 70 1/2. Your time in the sweet spot can be a great time to put your retirement plans into action or form more detailed versions of your plans. You can start setting yourself up to be a part of a lower tax bracket in retirement by lessening your nest egg by taking money out during the sweet spot period. It’s also a good time to take care of any preliminary costs that you may have in retirement. For example, if you plan on moving for retirement or buying a summer home, that sweet spot time can be a great chance to make that new purchase or prepare your finances to do so once you reach retirement. You can also use that time to pay down debts so that you don’t have to worry about them once you do retire. Regardless of what you decide to do, you should speak with a certified financial planner before you make any decisions during this period as they can help you make the most of it. Are you planning to take advantage of your pre-retirement “sweet spot”?
If you consider yourself a financially responsible individual, then you probably track your expenses. For some that’s done mentally, while others choose to actually track their expenses either with apps on their phone or by writing them down somewhere. Tracking where you spend your money may seem like a tedious endeavor, but it can have a big and helpful impact on your understanding of your finances and what you may need to do to change your spending habits in the future. First off, tracking your purchases can make you more aware of your purchases and expenses–it can bring them to “life” in a sense. Secondly, purchase tracking can give you a good idea as to what you prioritize and consider to be important. Seeing these priorities can help you to make changes in your purchasing habits that better reflect what is truly important to you or to gain a stronger idea as to what your future budgets may need to be. Finally, tracking your expenses can help you to organize your money, build a budget, and become a more savvy consumer. If you take the time to analyze your purchases, you may find that you could be more efficient with your money. For example, if you find that you purchase coffee at a particular coffeehouse and it costs $2.50, but you can also get a cup of coffee at a local convenience store for $1.00, you may want to get in the habit of getting your coffee from the convenience store (yes, I know they may not taste the same). Furthermore, if you are living on a budget so that you can be efficient with your money or build up your nest egg, purchase tracking is most likely a very important part of that process. Keeping track of the money you spend can be vital in retirement as well, especially if you are living on a fixed income and living off your nest egg. Regardless of your reasons for tracking your expenses–or how you do it–what matters is that you get in the habit and keep up with it.
Many retired couples and single retirees downsize when they retire. Who wants to deal with the physical and financial costs of the upkeep of a big house once the kids have moved out and there is not longer a need for all the space. While downsizing is a good idea and can definitely save you some money, you should be aware that it may not be as simple as it seems. Many retirees think that downsizing will suddenly free up lots of money that can be spent on vacations or to boost a nest egg. However, if you’ve dealt with moving before–as most adults have–you should be well aware that that freed up money won’t be instantaneous and that downsizing may actually cost you a good chunk of money in the short-term. For example, if you’re downsizing involves the construction of a dream home, it may not be ready by the time you sell and move out of your old house. It’s not uncommon for retirees to have to rent for a few months or a year before moving into a new house. This will obviously cost you rent as well as moving costs both into and out of the apartment or house you a renting. Another area where costs can add up is storage of furniture and assets that may not fit into you new home, but which you do not want to part with. Or, you may find that the furniture that you intended to move into your new home doesn’t fit and you will need to acquire new furniture. Items such as a new couch or dining room set can easily cost over $1,000 a piece. While downsizing definitely has some advantages and will save you some money, it should be approached in a thoughtful manner. You will want to do some research and legwork beforehand regarding where you will be moving to and what you will bring with you. If you decide that you want buy new furniture or store old items, you should either give yourself a budget or do some research on what storage rates are in your area. You may also want to talk with other retirees who downsized and what their experiences were like and inquire about any tips or advice they might have.
There’s a really good chance that you’ve had a family member who required long-term care towards the end of their life. You might even be going through such an experience right now with an elderly parent or relative. These experiences can range from hiring in-home care to placing your parents in an assisted living facility. Regardless, seeing others go through it and, if you cover the expenses, having an idea of the costs can leave a mark of you as you plan for your own retirement. It may cause you to think about how you want to age as well as the financial and emotions toll it can place of those who will have to cover the costs of any long-term care you might require. Thus, it’s not uncommon for people to build long-term care plans into their larger retirement plans. Some do this by building up a nest egg that’s large enough to handle any future expenses with little worry about whether any might be left over. Others save enough to cover costs for long-term care insurance. Meanwhile, others may invest in assets that can be sold off in the future to cover potential costs. If you are nearing retirement and haven’t put much thought into long-term care plans and expenses, you should take some time to think about it. Keep in mind that thanks to medicine and science, people are living longer lives today than they did a generation ago and that can mean retirements that last decades. These advances also mean that people with chronic illnesses can live longer lives. However, that longer lifespan comes at a cost as the best medical and elderly care services are not cheap. If you haven’t considered long-term care in retirement, you should spend some time reading up on the topic and how it could impact you and your retirement plans.
If you work for a municipal or state government, you are probably well aware of the issues facing government pensions. Many states and cities are facing potentially huge shortfalls in pension plan funding that will most likely reach into the billions. While these shortfalls will have the biggest impact on workers who are far from retirement, they will also affect those already in retirement as well as those getting very close to retirement. The governments facing the biggest shortfalls are already discussing ways to make up for the shortfalls, including limiting benefit amounts, eliminating post-retirement health insurance, and cutting back on spousal benefits. So, if you are a state or municipal government employee, what can you do to protect yourself? Well, the easy answer is to save enough so that you don’t need to rely on a government pension. However, for many government employees, that’s not a possibility and furthermore, they’ve made contributions throughout their careers and thus should rightfully get some of that money back to help with retirement costs. If you are a government employee and unsure of whether your pension will be enough to help with retirement, you will want to strongly consider having a secondary source of income to help get you through retirement or balance out any changes that may occur with your pension in retirement. If you are years away from retirement, you will want to pay attention to any changes that occur to your pension and plan accordingly. Government pensions could be a big retirement talking point in the coming years and decade, so pay attention closely.
When most people retire, they usually find that they have a lot more free time than they did in the past. That free time is often one of the most exciting prospects of retirement. It provides an opportunity to pursue the interests, hobbies, and travels that take a backseat while you work and raise a family. If you need some incentive to get excited about retirement, then use the thought of more free time as an excitement booster. Furthermore, use your retirement time to pursue interests you never even thought of or interests that will keep you active and sharp. Go visit that country you had longed to go to. Go ahead and hit the links everyday. Want to go back to school? Do it! Whatever you decide to do with your free time in retirement, just make sure you do something that benefits you. If you know that you interests and pursuits will cost money in retirement (i.e. travel budgets, golf course memberships, etc.), don’t be afraid to build those costs into your retirement plans and savings. The more you can do to make it easier to pursue your interests in retirement, the better. What do you plan to do with your free time in retirement?
Could you weather a financial emergency given your current savings? Where would the money come from to cover something such as unexpected medical bills or a necessary home improvement expense? In such situations it can be tempting to divert money ear-marked for your retirement savings towards those unexpected bills. Yes, such a move will provide short-term relief and provide you with the needed funds, but in the long-term impact can be quite substantial. First off, don’t forget that the money you don’t put into your retirement account won’t have an opportunity to grow (i.e. through investments) and won’t be there later, when you need it. Secondly, if your employer offers contribution matching, you will be missing out on extra money being put into your account. Employers won’t match if you don’t make any contributions of your own. Furthermore, if you are decades away from retirement, those matching contributions could add a nice chunk of money of your retirement savings without you having to do anything. While it might be tempting to stop making contributions for a short time–like a few months–with the belief that such a move won’t have a big effect, you should really avoid such thinking. Any suspension of contributions to your retirement savings should only be done as an absolute last resort and should be avoided at all costs. The key to retirement saving is being consistent with saving. If you do find that you need help with arranging your finances to cover an unexpected expense or want to just have a plan in place to cover an emergency, you should speak with a certified financial planner.