What sort of retirement lifestyle do you want?
In terms of the quality of your retirement life, planning is essential. The two most important things to consider are the kind of lifestyle you want to lead as a retiree and how you will afford that lifestyle. Here are some of the most popular retirement types, as well as some savings tips and tricks for before and after retirement.
What sort of retirement do you want?
For many Americans, retirement is an exciting prospect. Having the freedom to do as you please is a good feeling, and retirees look forward to making the most of it.
How they choose to spend that time is important, and there’s no shortage of options.
But they also need to plan how they’ll afford their retirement in advance, or their dreams for the future might not become realities when the time comes.
On average, Americans spend $60,000 per year after they retire. They spend this on living costs, bills and more exciting things like home renovations and travel plans.
It’s good to know this average amount as a starting point because it will inform how much you might need to save for each type of retirement lifestyle.
Some retirees like to live simply and won’t need as much saved to host dinner parties at home, enjoy low-cost hobbies like gardening and perhaps have one or two vacations a year.
Others will spend a lot more and need to account for their higher-cost lifestyle in their financial planning.
Some people choose the retire-early lifestyle, so they might need their retirement savings to last longer.
Other people work for as long as they can. It’s all down to personal preference, and the world (or the local golf course, if you’d prefer) is your oyster.
One important thing to consider is the “retirement spending smile.” Spending after retirement starts high, drops in the 70s and rises again in the 80s.
Including this in your budgeting will give you extra insight and financial padding.
What questions lead to an enjoyable retirement?
Determining which retirement lifestyle suits you best will largely depend on your goals and needs.
Everyone has a different vision of the future, but it might be hard to put that vision into words without prompting.
Here are some questions to ask yourself if you’re struggling to paint the picture of your dream retirement:
How much do I want to travel?
Do I want to stay at home and cut back on spending?
Do I want to go back to school or university?
Will I move to a different state?
Do I have a family I’d like to be able to spend money on? Children? Grandchildren?
How much will I need to pursue my passion projects?
Pursuing passions is common for retirees, but not all beloved hobbies have the same budget attached.
If you love hiking, for example, you’ll probably need to spend a lot less on that than you would if you loved sailing.
People also commonly move to a new home when they retire. And, since they have all the time in the world, many choose to tick as many countries off their travel bucket lists as possible.
What’s the best way to save for retirement?
Retirement lifestyle planning involves many significant decisions. Once those decisions are made, it will be time to start saving for your future and figuring out how to finance your activities as a retiree.
There are many ways to save, both before and after you’re retired, but you’ll probably do the bulk of the saving when you’re earning.
It’s not the easiest time to save for the future. Currently, 48 per cent of Americans don’t feel like they earn enough to save appropriately for retirement.
The cost of living is rising worldwide, and US residents need to know, now more than ever, how to budget correctly and make their money go as far as possible.
The recommendations from financial experts are:
Start saving as early as possible — Most people who want to retire by their early 60s will need to be saving by age 25. Set up a savings or pension account and pay in as much as possible. Even small amounts here and there will add up.
Invest in stocks and bonds — These can create more value in the long term. Remember that you shouldn’t invest in stocks without fully understanding the financial risks you’re taking, and remember that your investments will need to be monitored and managed.
Consider a Roth IRA (Individual Retirement Account) — Roth IRA contributions can grow tax-free for years and years, and they can be withdrawn tax-free after a person is over 59.5 years old as long as the Roth IRA has been open for at least five years by that point.
Put unexpected work bonuses and financial windfalls aside — It’s always lovely to receive a bonus, but if it’s not urgently needed, many advisors recommend putting it straight into your retirement savings. Does a new car matter as much to you as your retirement lifestyle?
What’s the best way to save money during retirement?
Having a large amount of money to retire with is excellent. But even a lot of money won’t last forever when it isn’t being replenished.
If a retiree isn’t careful, their savings could disappear quickly. Luckily, there are ways to keep costs down.
Set a budget and stay within it after retirement by:
Downsizing to a smaller home better suited to your needs in your old age
Moving to a state with a lower cost of living (some of the cheapest states to retire to include Alabama, Georgia and Iowa)
Seeking out bargains and discounts (there are public transport, amenities, goods and services discount options available to retirees and older people)
Working part-time to keep things ticking over
If you’re planning your retirement and need advice on how best to afford it, stay on our website to get more information from our blogs and articles.
Kate has written for leading publications and blue chip companies over the last 20 years.