Top Ten List of Retirement To-do's
Who better to ask for guidance on retirement than those who are living it now? Nationwide Financial and consumer research company Yankelovich surveyed current retirees to find out their top to-do’s on preparing for retirement. Check out their responses below.
1. Monitor your investments in pre-retirement
For many, keeping a close eye on their investments is easier said than done. While 43% of retirees said they monitor their investments more closely now than before they retired, the number one mistake cited by retirees was overspending.
It's often important for retirees to find investment options that provide more predictable sources of income, according to Nationwide®. However, retirees should be aware that more predictable income in retirement may cost them - either in terms of lower returns from conservative investments or the higher cost of insuring more volatile investments.
Insurance protections are subject to the claims-paying ability of the issuing insurance company. That's why it's important for retirees to evaluate their options and understand that the money they need in the next 5 - 10 years is most vulnerable because it's also the most crucial - if lost, that money is very difficult to recover over time.
2. Plan for rising prices/inflation
A penny saved is a penny earned, right? Not always.
Broad economic factors like inflation and rising prices can chip away at the buying power of longer-term investments like your retirement fund. Recently, the U.S. economy has seen retail gas prices hit all-time highs and the worst food inflation in 17 years.1
When planning for retirement, it’s best to assume prices will rise and inflation will increase. One simple way to keep track of broader economic factors is by monitoring the Consumer Price Index.
3. Talk with your spouse or significant other about how much you can spend in retirement
It’s important to be open with your spouse or significant other about how much you think you should, and will, spend in retirement so that you’re both on the same page. Similar to the way couples discuss buying a new car or a house while working, they should talk through important financial matters in retirement as well.
According to Nationwide’s survey, 93% of retirees responded that talking with a spouse about how much they can spend in retirement is important.
4. Focus on physical health
In light of increasing health care costs, focusing on physical fitness today is critical to remaining fiscally fit in retirement.
Recent findings by the National Retirement Risk Index illustrate that the high cost of health care is often overlooked by retirees, despite the fact that this cost is climbing 8% – 10% each year. Health care expenses can certainly burden your finances when you consider that the average hospital charge for coronary artery bypass surgery is $92,242.2
5. Put yourself on a spending budget
The best way to plan a budget is to know how much you can spend. Unfortunately, only 52% of people have ever calculated how much they can safely spend each year in retirement.
If you need help starting out, consider meeting with an investment professional, like the majority of people who said they calculated their annual spending in retirement. Investment professionals also can provide additional insight and tools to help ensure you stay on track with your plan. Which leads to number six…
6. Get a good investment professional
Just as going to the doctor is a smart way to help ensure you are
healthy, having an investment professional you work with regularly is a
smart way to plan for retirement.
Talk to friends for recommendations on who they use, as a referral can sometimes be the best way to locate a good investment professional, or find a professional.
7. Watch travel expenses in retirement
It’s cheaper and easier to travel when you are mobile, so take big trips when you are younger. Don’t save all of your vacations for retirement as this will be more costly.
Also, don’t take overly expensive vacations. As you are smart about spending when at home, keep the same habits while traveling.
8. Pay off your mortgage
Houses give you more than just shelter. They also comprise a significant contribution to your fixed expenses. By paying off your mortgage you can tap into your home’s wealth by living there "rent free" while eliminating a significant monthly expense.
Making extra payments can make a difference. For example, paying as little as $100 extra per month on a $200,000 mortgage at 6% interest would save almost $50,000.3 Some mortgage companies also offer bi-monthly payment schedules, just be sure there are no fees to do so.
9. Work longer
According to the National Retirement Risk Index, 53% of workers who retire at or before age 63 will be in danger of having insufficient funds during retirement. Interestingly, only 32% of those who retire at age 67 will be at risk.
One of the best ways to ensure you have sufficient money well into retirement is to work a few additional years, beyond what you originally had planned. It may not be what you want to do, but it will add more "cushion" to your nest egg in the long run. Even an additional couple of years can add significantly to your retirement funds.
10. Last but not least, anticipate spending more money than you thought you would.
No matter how much you plan, surprise expenses are inevitable. It’s important to acknowledge this and prepare for the unexpected. For example, many retirees don’t plan for the cost of maintaining their home and are caught off -guard by property taxes and maintenance costs that may rise substantially during retirement.
So there you have it — great information from those already living in retirement. It’s a lot to consider, but important to know.
For example, health care costs are already high, and are expected to continue rising rapidly. Health care costs alone can increase the share of households at risk of not being financially able to retire from 44% to 61%4. Knowing the impact it can have helps keep you aware as you plan your own retirement.
The good news is, behavioral changes, like working a few years longer, saving a bit more each month and adopting some healthy lifestyle habits, can make a big difference. Talk to an investment professional soon about how you can prepare.
2 Pennsylvania’s Guide to Coronary Artery Bypass Graft Surgery 2003, Pennsylvania Health Care Cost Containment Council, March 2005.
3 "Paying off your mortgage," truthfullending.com, April 11, 2008.
4 Center for Retirement Research at Boston College, 2008.
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