There are many important concerns and questions one should consider about retirement. The biggest questions remains: “Will your retirement income last and allow you to live in something approximating your current lifestyle?” As people continue to live longer lives, this question becomes increasingly important and the answer becomes even more difficult to predict. Estimating annual, weekly and even daily costs is a daunting task, but it is imperative to consider these factors in planning for retirement:
1. Basic Living Expenses: Basic expenses like food, housing, and taxes will not go away and recreational expenses will likely go up when you retire. Consider the retirement lifestyle you want, estimate your basic expenses, and plan accordingly.
2. Discretionary Expenses: Retirement introduces a whole new set of expenses such as that Caribbean cruise you’ve always wanted to go on. As healthcare expenses rise with increasing age, health savings accounts can help you prepare more. Discuss these expenses with a trusted financial advisor and also talk through your retirement expectations with your spouse and kids. In addition, join a community of other retired persons to learn what challenges they faced and how to overcome them.
3. Shift Your Focus: One way to alleviate retirement spending concerns is by shifting your mindset, “Instead of focusing on how long your savings will carry you, focus on how much income your savings will generate once you’ve retired.” Consider all potential sources of retirement income including Social Security, pension plans, earned income, and possible annuities.
Consider these factors and begin calculating the required income for the retirement you want. Thinking through these expenses today will help circumvent a huge financial headache and give you peace of mind when the time comes to retire.
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