How does retirement look these days? We surveyed 3,700 people and found that they have 7.5 hours per day of leisure. 92% of respondents believe that this is enough time to be able to do what they like. Most people emphasize that they are looking for experiences more than things. This could include time spent in activities that improve your health, such as exercise, yoga, or mindfulness, and also special “peak” experiences, which you can share with your social media followers and friends to inspire them. But that’s not all. According to AARP research, three out of four fifty-plus adults would like to remain in their homes and their neighborhoods. There’s even more: Many retired people work at least part-time. Many people take care of their family members. Many people volunteer in their local communities and around the globe.
Retirement, no matter how you see it, is a time when more money is leaving than c
oming in. How do you determine if you have enough money to support your lifestyle? You have to get down to business. JJ Montanaro is a certified financial planner working with USAA’s Military Affairs Advocacy Group. You can find out more about where to start by clicking here. It’s also a good idea to stop and take stock of the facts in your life right now, as well as the future.
CONDUCT A REALITY CHECK
Even though expenses are not going down when you retire, they don’t stop increasing.
If we take a look at the averages, $46,000 is the annual amount that older households (those whose owners are 65 years or older according to the Bureau of Labor Statistics) spend each year. This is about $1,000 less than what all households in the US spend on an average year. This means that you might not need to replace 85 percent of your preretirement income.
This means that you need to take a hard look at your personal situation and determine if you are in the average category. If you take a look at your finances before retiring, do you have a large budget for commuters? You may be able to save a few thousand each year if you don’t go to work every day. How much did you save? You’re now a net spender and the money you used to automatically contribute to your retirement plan is no longer required to be spent. Look at the other side. If you have been heavily subsidized by your employer, the amount you spend on insurance could go up by thousands per year. If you worked long hours during the week and spent weekends at home recuperating, you have many options for how you spend your free time. To see where your chances of falling, run some numbers before you retire.
GET REAL ABOUT WHETHER YOU’LL CONTINUE TO WORK (and how much money you’ll make if so).
The 2019 Retirement Confidence survey from the Employee Benefits Research Institute found that 80 percent of workers think they will continue working for their retirement pay. However, only 28 percent of those who actually work do so. The majority of workers expect that the income they earn will only be a small source of income.
Montanaro says this is an important issue. Not only for those who expect to continue receiving a paycheck in retirement but also for the 40 percent of people who have to retire earlier than they expected due to a medical issue or job loss.
CONSIDER THE HOUSE
A paid-off mortgage is a great way to have some breathing room as you approach retirement. It may require some planning. You need to plan the loan term so you can retire it as you would. Montanaro says that it gives you more options and flexibility than if you don’t have it. You don’t have to take into account taxes, insurance, maintenance, and you can also consider a reverse mortgage. These loans, which allow seniors 62 years and older to tap into their equity at home, have many critics. However, experts recommend using them as a back-pocket credit you can access if your portfolio is in decline.