Planning Your Retirement Isn’t Just About Saving Money or Investing
Every small step you take during your lifetime will affect your retirement
Many people associate the term retirement with different words or contexts, from free time to travel to sitting at home all day.
But what many people forget to take into consideration is that planning for retirement goes far beyond personal finances.
The popular saying that money is a tool makes much more sense when it comes to retirement. Your financial strategy is only part of the puzzle that must be integrated with the rest of your vital needs and concerns.
Of course, don’t forget to put each of the needs in an economic perspective. The result will surprise you.
If you have heard that a house is the biggest purchase you will ever make, forget it. That place is taken by retirement and by quite a bit.
Money is critical for retirement, but mostly for what you can contribute in other areas. If you save without more, it is easy that later you will not have the retirement you want. In fact, not planning for retirement with a lot of financial freedom is one of the most repeated mistakes with money.
There are many vital needs when you retire that you must be clear about that no matter what the tide, you will not be shipwrecked.
Personal Finance in Retirement
Money is important when you retire because it will pay for your retirement with a lot of economic freedom. However, according to a study by Merrill Lynch, the only thing that 88% of people seek peace of mind about their finances is that only 12% will bet on accumulating more capital the better for retirement.
This causes many to end up regretting their decisions. So much so that 36% say they would have acted differently with their money. By comparison, only 18% would have done differently with their careers and 15% with their health. Of the decisions they would have made, 90% believe they would have spent less, and 79% would have sought financial advice.
The key right now is to define peace of mind, which 57% identify as living comfortably while 39% talk about living however they want. Interestingly, 34% will want to cover themselves against an unexpected expense as part of that peace of mind. This is where health issues come to the fore. For 80% of people over 50, their biggest financial concern has to do with a health problem for themselves or their partner.
Health and Wellness in Retirement
Few things are more important in life than health. For 81% of people, it is the key factor in determining how happy they will be in retirement ahead of financial security (81%) and family and friends (58%).
And yet it is also one of the most underestimated items. One of the common mistakes when planning for retirement is thinking that your status will be the same at 65 as at 87 and not knowing how to anticipate these costs.
Following some healthy habits throughout your life can help you have better health, avoid degenerative diseases, and reduce costs in this section. To get an idea, having just one full-time caregiver means an expense ranging from $1,000 to $2,000 plus Social Security taxes.
Family When Retiring
Family is the primary source of satisfaction, regardless of age or condition. The problem is that all this affection also generates many emotional and economic tensions.
On the one hand, there are the tensions themselves. No one wants to be a burden to their family (half of them see it as a burden to need constant physical care). And on the other hand, outsiders.
Among the most repeated mistakes parents make is to become a family bank that lends money to their children at the expense of their own retirement. On average in the United States, a couple lends $6,000 to $7,000 a year between children over the age of 21, siblings, parents, and, to a lesser extent, grandchildren.
The way to avoid these problems is, on the one hand, greater family communication in economic terms (for example, about the will or care in old age) and better financial education that enhances the independence of all members.
Work And Income Streams In Retirement
Are we looking forward to retirement?
Merrill Lynch data brings the percentage up to 70% and identifies four types of active retirees: those who do it because they enjoy their work, those who work for NGOs, those who work to maintain their social connections, and those who do it out of necessity. The latter account for 28% and need this money to pay their bills.
To avoid being one of them, you can start by working part-time at something that motivates you, learn new skills, or postpone your retirement for a few years.
Housing In Retirement
Housing is the biggest asset of most families. Moreover, it is their first investment and, to a large extent, their only. However, when they retire, much of it will be squandered to gain financial freedom and have a better retirement.
To understand you better, as you go through phases in life, your accommodation needs to change. When you live as a couple, a 1- or 2-bedroom house is enough, but when the kids arrive you will need more rooms and may even move into a housing development.
And when do the babies leave the nest? Will you still need four bedrooms or will you live in a housing development? The answer is probably no, and worst of all, this type of housing will cause you to spend a lot more money on heating, taxes, and cleaning, for example. Wouldn’t it be more logical to move? More than half of the answer is no.
Moreover, when thinking about moving, the most common mistake is to immediately think about selling and buying a house, which will immediately cause you to pay a lot of taxes. Moreover, it is very easy to fall into the temptation of sharing the profits with your children.
The alternative is to switch from renting and renting that house that has outgrown you. You will charge more than you pay for the new rent and you will have generated a recurring income for your retirement.
In addition, you can also save more for retirement by cutting out unnecessary home renovations or installing energy-saving technology. In fact, this is one of the changes most retirees would make in the way they spend their money on housing.
Enjoying The Sunset In Retirement
It is extremely easy to become a workaholic while at work. Society itself pushes us to do so. Retirement is the time to enjoy the free time and dedicate to leisure.
The curious thing is that the money you have accumulated will play a much less decisive role than you think. There is almost no difference in the perception of freedom and flexibility based on accumulated capital.
One thing you should be clear about is that experiences will be the catalyst for this leisure. Most retirees say that living new experiences is more important than buying things at that point in life.
Final Thoughts
What you should make clear in the end is that every small step you take during your lifetime will affect your retirement.
Small changes can have a big impact on your retirement, especially in terms of your health. If you want to ensure your retirement with a lot of financial freedom, start saving most of your income and invest early and every month.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
I am at an age where I know a lot of people who have "retired" and more who are talking about how long until they can "retire". The longest job I ever had was 11 years. I never worked for a company that had a traditional pension. Most of the people I know who worked at the same place for 30 years and earned a pension hated their jobs for probably 20 of the 30 years. I enjoyed every job I had and I still want to work another job.
I believe the pervasive attitude about "retirement" is misplaced. You shouldn't be working a job you hate for 20 years just so you can do what you want, how you want and when you want after trading the best years of your life. As we age, we often have to spend more of our time managing our personal health, so we can't necessarily go to an office for 40 to 60 hours a week. But I don't think we should be spending 20 hours a week on the golf course either. Society needs the experience and knowledge that comes from age. We shouldn't be denying society the benefit of our years of experience.
So, what exactly does "retirement" mean to you? Does it mean you feel like you've given everything you have to give and now you think your best use is to drive around the country in an RV and go fishing 5 days a week? If you are spending 30 hours a week with the grandchildren, helping your kids manage child care, is that really "retirement"? Or have you just changed your priorities in life and you are now "working" for no pay as a child care professional? Does "retirement" simply mean you can freely take off 3 hours a week from other responsibilities for your various appointments with physical therapists, cardio-vascular specialists and other medical practitioners? I'm not really sure I am looking forward to extra hours in medical office waiting rooms, but I accept that it will become increasingly necessary for me as I get older. That doesn't mean I can't spend several hours a week educating younger people, either formally through teaching college classes, or informally through tutoring. And then there is the ever elusive personal memoire to be written. I suppose many best-selling authors might say they "retired" after their first best seller, but that doesn't mean they stopped writing.
Planning for retirement, or maybe non-retirement, should include a plan of what you are going to do differently with your time if you no longer have the responsibility of showing up at the office every day. It should NOT be a plan to turn on the TV, sit on your couch under a blanket all day and check-out from life.