Get a handle on what your lifestyle really costs
Many of our clients have a common goal for retirement; living their current lifestyle with less work and more time for fun and family. That sounds pretty good, doesn’t it?
When analyzing retirement readiness, it’s important to know how much that desired lifestyle actually costs. We start with a simple question: what are we spending money on now that we plan to continue buying? Many of things can be considered “the basics” and can include such items as groceries, mortgage payments, utilities, insurances, etc. Most people have an accurate assumption for these expenses and they are easy to track. Even if you are familiar with your typical expenses, challenge yourself over the next 30-60 days to track what is actually spent. You may be surprised!
The challenge comes when we attempt to factor in expenses that you don’t pay on a month-to-month basis. Things like traveling expenses (lodging, gas, flights, eating out, etc.), birthday and holiday gifts, dining out and vehicle maintenance. We see this spending go underestimated or undocumented because it often goes on credit cards and is paid later.
It is important to paint a picture of this ideal retirement lifestyle in the context of how you currently live. How are we spending our money now and will we keep doing so in retirement? Getting ambitious and creative while thinking about the additional things that will make you happy in the next phase of your life is why we must…
Set and Prioritize Goals
What makes me happy and what might make me happier? What kind of an impact do I want to have on my family, friends and community? What do we have on our bucket list? Where do we want to go and what do we want to see?
Challenging our clients to ask themselves these questions before retirement is one of the most important and rewarding things that we do at Personal Wealth Advisory. It is also the first phase of our financial planning process because we believe that incorporating these goals into a financial plan gives our clients the best opportunity for success.
So take the time to think about what makes you feel happy and fulfilled. Write those things down and be sure that you are factoring them into your financial decisions between now and retirement by…
Creating a goals-based financial plan
How can we know if the decisions that we are making now are helping us or hurting us? Are we on track to achieve this ideal picture that we have painted of our future? Are we in a position to consider retiring earlier than we initially planned?
We believe that these questions are best answered by:
1. A comprehensive analysis of your current financial position and probability of success in reaching the goals that you outlined above
and…
2. A realistic and achievable plan to improve your chances of getting where you want to go
However, simply creating a plan is typically not enough. We have to keep that plan updated as our lives and goals change. We also have to hold ourselves accountable for the actions that we need to take to put ourselves in the best position to achieve financial independence.
Save
Saving more money. What a ground-breaking and revolutionary idea!
We realize that this may not be the most innovative thought in retirement planning but the impact of having more money in retirement cannot be denied. Retiring with more financial assets can accomplish considerably more than making us richer:
– It may allow us to achieve more or more significant goals
– We may be able to consider a more conservative investment approach
– We could consider deferring Social Security and receive a higher monthly benefit
– Our retirement income may be less affected by market fluctuations
For many people, this can go beyond simply saving more money for the future. It can also have tax benefits today. Who doesn’t like the sound of that?
There is a good chance that your 50’s (and possibly 60’s) are your highest income earning years. It is also common for your children to begin becoming independent at this time and you may also be getting towards the end of your mortgage. These are all great things! However, with children leaving and less mortgage interest being paid, what are we losing? Valuable tax deductions and exemptions.
When we combine this chain of events with earning more income, it can provide an even greater incentive to contribute as much as we can to our tax-deferred retirement plans. We get the potential for income tax savings now and are providing our future selves with more ammunition to live a fulfilling and impactful retirement.
Building or rebuilding cash reserves
Our 40’s and early 50’s can be a significant drain on our cash savings. We’re buying a second home, putting kids through school, buying cars, fixing cars, traveling and so much more. The years leading up to retirement are the perfect and maybe only time to rebuild the liquid cash reserves that could be so important down the road.
Work on your health
We see one consistent obstacle facing our clients that jeopardizes the objectives that we are aiming for together. Health. Nothing creates a greater challenge to financial independence than poor health. Not only do many of our clients’ goals involve travel or being physically active in other ways, health-related expenses can be a massive financial burden1. It is likely that your ideal retirement includes physical therapy, surgery or an extended need for long-term care. Now is the best time to be proactive and invest in your health.
For some people, this means working out at a gym, running, biking or yoga. For others, healthy eating is the preferred route to good health. There are plenty of easy2 ways to be more mindful of your health that everyone can achieve. Whichever way you decide to maintain your health, the time to take action is now.