We all know we should be saving for retirement, but many of us have never stopped to consider what retirement will actually look like. While the term “retirement” refers to the time in our lives where we can withdraw from the workforce and leave our wage-earning years behind, there’s more to it than that. It’s the closing of one chapter and opening of another and it’s important to think ahead about how that new chapter will be written.
There is not a fixed age or magic number that automatically deems you retired. You reach retirement when you have financial independence from sources of income that you don’t have to earn by working. For some, that will come sooner and for others it will be later, depending on their savings, investment income, pension, Social Security income, and other resources.
You’ve achieved retirement when you have what you need to cover your living expenses without having to work.
Retirement Looks Different For Everyone
Whether you have a vivid picture of your ideal retirement years or just an inkling of an idea, the reality is retirement looks different for everyone.
For some, an ideal retirement might include packing up and moving to Florida, jet setting around the world, or spending every possible moment on the golf course. For others, it may include sitting down to write the next Great American Novel, putzing around in the garden, or spending more quality time with their grandkids.
Some people look forward to getting out of the rat race and finally having the time to slow down and smell the roses. Other people have a hard time stepping away from their careers, thrive by staying active and feeling needed, and have no intention of slowing down.
The point is, there’s no one way to do retirement—it all depends on your vision and your resources. Ultimately, having the retirement you want means budgeting and saving for retirement based on the lifestyle you plan to enjoy.
Can You Afford the Retirement You Want?
Each of us bears the responsibility of planning, saving, and investing for a comfortable retirement. But according to the most recent Retirement Confidence Survey by the Employee Benefit Research Institute, only 23 percent of workers are “very confident” they will be able to retire comfortably.
Social Security and Medicare, provide a bare minimum of income and healthcare. If you rely on government programs to fund your retirement, whatever retirement lifestyle you have in mind will be severely limited. Many seniors struggle to pay for their basic needs, much less the easy-going retirement lifestyle of their dreams.
If you fail to save a sufficient nest egg during your earning years or if you make poor investment decisions, chances are you will discover that the retirement you expect is far beyond reach. You may have to cut your expenses, work longer than you hoped, and scale back your retirement lifestyle goals.
Planning for the Retirement You Desire
A long-running rule of thumb is to save at least 10 percent of your income for retirement. However, that number does not necessarily take your desired lifestyle or other factors into account. Few retirees continue to have the same level of income they had when they were working, so what does that mean for your retirement lifestyle?
If you can’t afford to pay your bills or live comfortably without working at least part-time to supplement your retirement income, your golden years may not be what you imagine. Even if you’ve always enjoyed working, you might find it more challenging as you get older. But If you continue working beyond the government retirement age, it can boost your social security income measurably. Plus, you could have the opportunity to further maximize your employee benefits and add significant amounts to your personal savings.
If you are debt-free, plan to live simply in retirement, and you don’t have any major health concerns, a standard retirement savings plan is likely to cover your basic needs comfortably. By enjoying most meals at home and keeping extravagance to a minimum, you could find that easing into a reduced income is a relatively easy adjustment.
If you live large now and you’ve grown accustomed to the finer things in life, you’ll need to be more diligent about ensuring you have sufficient income in retirement to continue your upscale lifestyle when you’re no longer earning.
Thriving In Retirement
No matter your financial position, retirement changes how you live your daily life, so it’s important to think about the steps you can take to thrive.
Retirement is an adjustment. If you’re used to a routine that includes showing up for work every day with a purpose and agenda, the freedom may not feel as good as you expect. It’s not uncommon for retirees to become depressed because they are bored and feel useless. So no matter your budget, start planning for how you will spend your days.
You may not be on an employer’s schedule, but having no schedule at all can work against you. Consider creating a flexible routine that includes self-care, staying physically active, socializing, and doing the things that are important to you, especially the things you had little time for in your working years.
Conclusion
Don’t let the brochures with happy gray-haired couples walking along sandy beaches and dining in fine restaurants fool you. The truth is, a carefree, lavish retirement lifestyle is more the exception than the norm. But whatever your idea of living the good life in your golden years looks like, it’s not going to happen just because the clock strikes 65 and you quit working. It’s up to you to plan, save, invest, and do what you can to make the retirement lifestyle you desire a dream come true.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.