The transition from working life to retirement can be a major one, and the idea of maintaining your current lifestyle without having a fixed income can be intimidating for some people.
While the ideal life after retirement is different for everyone, whether you envision relaxing at home, doing volunteer work or travelling the world, the best retirement plan ensures that you have enough income to cover your expenses moving forward.
Even if you’ve been doing well with your savings, you need to be sure that your retirement funds are adequate for maintaining your desired lifestyle. This also means that you’ll have to keep a close eye on your budget since you’re no longer earning a fixed income. It’s even more crucial for you to budget carefully so that you will live within your means.
Be Flexible with Spending
No matter what lifestyle you want to pursue after retirement, you need to be flexible with spending. The less you spend before your retirement, the more you will be able to save and cutting out unnecessary spending when you retire can make your savings last longer.
Envision Your Lifestyle
To maintain a comfortable lifestyle, a good goal to aim for is saving 80% of your pre-retirement income. For example, if you earn $60,000 per year right before you retire, you will need $48,000 in the first year of retirement to maintain a similar lifestyle, and this amount main increase annually with inflation. However, this can be flexible as it depends on your lifestyle goals.
It’s easier if you already have a vision of how your life during retirement looks like, so you can save accordingly. For example, if you see yourself spending more time on the golf course when you retire, find out how much membership costs and if there are any special rates for annual membership for senior citizens.
Keep Track of Your Funds
Retirement doesn’t mean you can spend all your hard-earned savings, though. In fact, it’s more important to budget now because you no longer have a stable source of income. Start by listing down all the different sources of income you’ll have prior to retirement, such as interest from your savings, investment dividends, rental income or business profits.
You’ll also need to look at your lifestyle and think of the various expenses you’ll have to include in the budget. Ideally at the end of this process, you’ll have a better idea of how much you’ll need to save in order to have a comfortable retirement.
Speak to a Financial Planner
The idea of planning for retirement can be overwhelming for some people because of the many factors they need to account for, such as the lifestyle they’re used to and the activities they have planned. This is where a financial planner comes in.
Working with a financial planner can help you get a better perspective on your retirement strategy. He or she can also help you determine if your goals are feasible and advise you about how you can achieve them.
Whether you have years to go before your retirement or you’re already in the middle of it, it’s a good idea to review your plan with your financial advisor at least once a year.
Review Your Plan
Perhaps you have created an initial retirement plan and then realised that it no longer suits you. You might have decided to retire somewhere with a different cost of living, changed your mind about some of your investments or gone through a significant life change. All these factors can affect your retirement lifestyle and how much income you need to live well in retirement, so it is important to keep your plan flexible and review it regularly to ensure it stays relevant.
