Retirement life is not the same for everyone. Some people want to spend their retired years traveling around the world, others want to volunteer more around their community, and others simply want to relax at home, surrounded by their friends and family. Creating the type of retired lifestyle that you want requires some forethought. To reach your retirement goals, there are some important things to keep in mind as you start planning.
Creating a Retirement Budget
For many people stepping into retirement, they will switch to a fixed income that will require careful budgeting. So, before you plan to retire, look closely at your spending and necessary expenditures.
“The first tip is to be honest with yourself about your monthly expenses,” said Justin Vossen, investment advisor and principal at Lutz Financial. “Make sure you understand what those are before you decide to retire.
“Many folks have no idea. There are free spreadsheet templates online that will help you break out your expenses and remind you of many items you may forget about. The fewer fixed expenses you have in retirement, the more flexible you can be with your budget. Also, work to understand your future tax burden as it relates to your sources of future income. More than likely, your taxes paid will change as you move into retirement, obviously depending on your future sources of income.”
Planning for the Unexpected
While much of retirement is living spontaneously and enjoying life as it comes, it also requires preparing for the unforeseen.
“As cliché’ as it sounds, we need to prepare for the unexpected,” Vossen said. “I don’t think anyone guessed we’d have close to a 9% inflation rate this year.
“You must have a cushion built into your plans to absorb some of these unexpected things that happen during retirement. Other things you need to prepare for are longevity, market fluctuations, increases in expenses, health issues, and unexpected family needs that you may not have the day you decide to retire. A good financial plan builds in some level of a cushion or contingency; otherwise, you need to be able to adjust on the fly by reducing expenses.”
Health Considerations
To get the most out of your retirement, it’s important to keep both physical and mental health a priority – and this begins well before retirement. So, advocate for yourself and stay on top of preventative exams and checkups. Don’t be afraid to reach out to your medical team about creating a strategy to maintain or improve your health as you age. This might include coming up with a diet and exercise plan or discussing medications or treatments that you will need as you enter retirement.
Retirement can also bring changes to mental health. Not going to work on a regular basis may mean social interactions may diminish, and feelings of loneliness and isolation may set in.
“While it’s important to stay physically as healthy as we can, it’s also important to remember to stay mentally healthy,” said Nate Underwood, founder and president of Heritage Communities. “This involves things like growing and nurturing a social circle, having events to look forward to, and meaningful activities.”
In a September 2022 Methodist Health article, Dr. Lindy Fields wrote: “Socializing plays a key role in keeping your mind sharp. You might not realize it but engaging in conversation requires a lot of cognitive abilities, including attention, language, memory and complex thinking. This socialization can take the form of calling a friend or family member on the phone, meeting up with someone for a meal or coffee, or engaging in local community events.”
Health Care Costs
The price of health care continues to increase, so it is critical to plan on how you will pay for those on a fixed income.
Vossen noted that long-term planning with a financial professional will help alleviate some of the stress that comes with planning for unknown medical costs.
“When we do retirement planning for clients, we actually inflate future medical expenses at a higher rate of inflation than other retirement expenses,” he said. “Understand what you will be paying to Medicare based on your modified adjusted gross income in retirement to start and then add a rate of inflation annually from 4.5%-6%. It’s hard to believe that medical expenses could continue to rise at recent rates over the next 30 years, but it is probably less realistic to think they rise at only normal longer-run inflation rates of 3% or so.”
Some retirees may wish to move to a retirement community, while others might need to live in an assisted care facility. There are many advantages that come with these living situations, but a move like this will require additional financial planning.
“The largest [benefit] is the ‘community’ that each resident joins,” said Stephanie Grade, regional vice president of operations at Oviation by Avamere. “Finding new friendships and engaging in social activities is so important … also reducing the stress in their living environment through the amenities, such as housekeeping services, on-site maintenance, on-site restaurants, and transportation services.
“These are amazing benefits that allow you to simply relax and enjoy your time. Make sure to visit various communities so you get a feel for how they are. When you are visiting with senior living professionals, be very honest about your health and what lifestyle you really want as you age with assistance.”
Underwood explained that there are some health care options that can help offset the cost of assisted care facilities, and shares that research is key to making the right location decision.
“I recommend learning more about long-term care insurance, VA benefits and Medicare and Medicaid,” he said. “You will want to know what each of these financial tools will do for you and what they will not.
“Even within long-term care policies, be certain you understand what will be covered and what will not. It sounds very simple, but care is provided by people. It’s important to move into a care setting where you feel like you can build a relationship and rapport with the staff in the building. If you are able, speak to other residents and their families about their care experience. Ask key staff how long they have been with the company and how they feel they are supported. In many ways you are interviewing folks for a very important job – the privilege of taking care of you or your loved one.”
Retirement can be some of the most rewarding years of your life. Setting goals and finding tangible ways to meet them will help you maximize your new work-free life. Plan for not only the nuts and bolts of retirement, but also things that bring fulfillment and joy along the way.
“As you step into a new chapter and phase of retirement, I believe finding purpose is of great importance,” Grade said.
