How Much Do I Need to Maintain My Lifestyle in Retirement?
By Edward Benway
What does your ideal retirement look like? Do you envision spending your golden years close to home or near family and friends? Maybe you dream of traveling the world or moving to a warm, sunny climate? Many retirees enjoy volunteering or discovering a new hobby they are passionate about. But you may also be wondering how much it will cost to fund these retirement dreams. Wouldn’t it be nice if someone just handed you a road map to guide you to your ideal retirement? This article is a good place to start. Answering the following questions can help you determine what you want your retirement to include and how to make it happen on your terms.
What’s Your Ideal Retirement Date?
Many of us desire the flexibility that comes with retirement, whether that means retiring early or lightening your workload little by little so you can invest your time and energy into what’s most important. Your age (now and in retirement) is one of the most significant factors to consider when planning for your future. If you want to retire early, you’ll need to make sure your investments are set up to start withdrawals without sacrificing growth. You’ll also want to run a variety of scenarios with different market timing to determine the best strategies to maximize your wealth.
What Do You Want Your Retirement Life to Look Like?
Have you thought about the type of lifestyle you want to have in retirement? If you know you want to travel, play golf, or spend time with your grandkids, you need to factor in what that looks like, how much it will cost, and how you’ll make it happen.
For example, if you plan to travel, you’ll need to consider:
- Will you be traveling stateside or internationally?
- How often do you want to travel?
- How would you like to get there? (e.g., car or RV; first class on a plane or your own plane)
- Where would you like to stay? (e.g., 5-star hotel, Airbnb, with family members)
- Will you be traveling with your family? Would you like to cover their expenses too?
- Will you maintain your primary residence? If so, who will watch your house and maintain it while you’re gone?
Even if your dream is simply to spend time with your grandkids, you’ll still need to think through your expectations. To some people, “spending time with grandkids” means babysitting a few times a week. To others, it means footing the bill for all-expenses-paid trips to various destinations of their choosing. Whatever it is you want to do with your time, map out the details so you can have a clear picture of how much you need to allocate to make it a reality.
Will You Earn an Income in Retirement?
Although you won’t need to work during your retirement, it’s a great way to stay active, keep your mind sharp, and maintain a sense of purpose—and maybe even help you live longer. (1) Some retirees choose to build a second career around things they are passionate about. No matter what you do, if you plan to work during retirement, you’ll have more resources to afford even greater financial flexibility.
What Kind of Healthcare Coverage Do You Expect to Have?
Right now, you most likely have health insurance. When you stop working, you’ll need to secure healthcare coverage another way. You may be able to utilize your spouse’s plan if he or she is still working. Or you can get coverage through the healthcare marketplace. You qualify for Medicare starting at age 65, but even then, you may want additional coverage to pay for prescription drugs, dental care, eye exams, and other expenses.
Retirees sometimes fail to fully plan for expenses during the later stages of retirement, and medical care often tops the list. It’s estimated that retirees will use 15% of their income for health expenses, and the average retired couple could see healthcare expenses of approximately $315,000 (after tax) after age 65. (2) Don’t let this be a planning oversight that prevents you from retiring comfortably!
Will You Have Any Dependents?
Your kids may be grown and out of the house by the time you retire, but that doesn’t necessarily mean you’ll stop supporting them financially. According to a recent study, about half of parents still give financial support to their adult children. (3)
And even if you aren’t helping your kids out with daily expenses, you may want to contribute to their weddings, down payments on homes, or tuition for your grandkids.
Will You Leave an Inheritance for Your Family?
Most people want to leave a financial legacy for those they leave behind, but if you plan to pass your wealth to your children and grandchildren, it’s important to make the transition as smooth as possible with a comprehensive estate and legacy plan. Be sure to consider what kind of legacy you want to pass down. Legacy planning allows you to incorporate family or financial values into your wealth transfer. If your children aren’t as adept at money management or have made financial mistakes in the past, your legacy planning can help guide them through what to do with their new wealth. Finally, legacy planning may help protect your grandchildren and encourage generational wealth-building for decades to come.
What Is Your Charitable Giving Plan?
Do you want to continue your generosity when you’re retired? What will that look like? Whether it involves setting up a foundation or leaving assets for charities in your will, a smart charitable giving plan can help ensure you continue to support the causes you care about. There’s no lack of options when it comes to giving, so be sure to explore donor-advised funds, qualified charitable distributions, or charitable remainder trusts to not only bless others but also possibly minimize your taxes and maximize your gift.
How We Help
Determining how to fund your ideal retirement is not a one-size-fits-all formula. It requires a more holistic, big-picture perspective that encompasses your financial situation, family history, and goals, among other things.
Focusing on your priorities for retirement is a great place to start the planning process. You will also want to look at ways to manage the risk in your portfolio and appropriately assign asset allocations that make sense for you and your family. By taking a long-term perspective, you will be able to manage the inevitable ups and downs of the market and economy.
Our goal at Measured Wealth is to simplify financial management while still prioritizing your unique needs and inspire you to be more confident in your financial decisions. If you’d like to partner with a firm that will help you find the right balance between enjoying life and guarding your nest egg, contact us by calling our office at 603-431-1444 or visiting our Measured Wealth Private Client Group website to set up a complimentary consultation.
About Edward Benway
Edward Benway is founder and president of Measured Wealth Private Client Group, a financial firm dedicated to exceeding expectations and providing integrity and uncompromising quality to help each client pursue their financial goals. With nearly 30 years of experience in comprehensive estate and business planning, Ed is known for using his knowledge and skills to help his clients navigate the steps necessary to achieve financial security for themselves and their families. Serving small business owners, pre-retirees, and retirees, Ed is passionate about balancing risk versus reward and guiding his clients from accumulation to distribution with confidence. He believes in the power of building strong, long-lasting relationships with his clients, becoming a true partner on their financial journey so they can focus on what matters most to them.
Prior to joining the financial industry, Ed served six years in the United States Air Force, receiving the Air Force Achievement Medal and the Air Force Commendation Medal for his service to our country. He has been a guest lecturer for the New Hampshire Bar Continuing Education, lecturing on the complexities of estate planning, and hosted the widely-recognized financial talk show Talking Money, which aired across the region. When he’s not serving his clients, you can find Ed spending quality time with his wife, Nancy, and their children. He enjoys staying active, traveling, golfing, and reading. To learn more about Ed, connect with him on LinkedIn.