What’s the recipe for a successful and comfortable retirement? There are many ingredients, including disciplined saving, self-restraint when it comes to spending, a plan to pay for medical expenses and much more.
Three of the most important components of any successful retirement involve your mindset and how you approach the retirement planning process. Call them the “3 Rs.” If you can successfully master the 3 Rs, then you will likely have a solid financial foundation for your retirement.
Have you considered the items below? If not, it may be time to reexamine your approach to retirement planning and make necessary adjustments.
How much income do you need to support your lifestyle in retirement? Not sure? A well-defined budget can help you answer that question. It can also help you track your spending and make adjustments where needed.
One common retirement planning mistake is to develop a budget with unrealistic expectations. For instance, some retirees may assume their expenses will drop significantly after they retire. They may assume they will need only 70 percent or 80 percent of their pre-retirement income.
It’s true some expenses may go down. You may downsize to a smaller home. Without a daily commute, you and your spouse may decide you need only one car. There are certainly areas where you could trim expenses.
However, there are also expenses that could go up. For example, many retirees see their health care spending increase as they age.
Also, you may have more free time on your hands in retirement than you’ve ever had in your adult life. You’ll probably look for ways to fill that free time, and you may be tempted to do so by shopping, traveling or taking up costly new hobbies.
In fact, it’s possible your discretionary expenses could actually increase after you retire. If you don’t have a budget, start developing one today. After you create your budget, review it to see whether your expectations are realistic.
The third component of a successful retirement is discipline, which can bolster your retirement in a few ways. Perhaps most important, you need the discipline to stick with your savings plan in the years before you retire. After age 50, you can make additional catch-up contributions to your 401(k) plan and IRA. If you can regularly make those contributions, you could give your retirement savings a significant boost.
Discipline also plays a role after you retire. There’s the discipline needed to stick to your budget, which can help you make sure you don’t drain your resources too quickly. And there’s also the discipline necessary to execute your investment plan. During downturns, it may be tempting to make a rash decision. However, that rash investment decision could have big consequences later.
Reserves for Emergencies
Emergencies happen. You’ve likely had your fair share of unexpected costs pop up during your life. They may have come in the form of house repairs, medical costs and more. Those same surprise expenses can also be problematic in retirement.
Of course, the difference in retirement is you may not have the income needed to fund those emergencies. A home repair that costs several thousand dollars could eat up a substantial portion of your monthly income. Long-term care or other forms of costly medical treatment could also drain your savings.
That’s why it’s important to have plans in place to cover such expenses. Look at various insurance policies, such as long-term care insurance, to help with things like an extended stay in a nursing home or even in-home care. You may also want to build up your reserve of savings for substantial out-of-pocket costs.
We can help you develop a retirement income plan that incorporates the 3 Rs and gives you a strong financial foundation. Contact us at Safe Retirement Strategies today to start the conversation. We welcome the opportunity to help you plan a reliable and comfortable retirement.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
15724 – 2016/5/31
Safe Retirement Strategies
8900 Indian Creek Parkway
Building 6 Suite 250
Overland Park, KS 66210