Who better to ask for guidance on retirement that those who are living it now? Along with consumer research company Yankelovich, we surveyed current retirees to find out their top tips on saving for retirement.
1. Monitor your investments before retirement
Money needed 5-10 years into retirement is most vulnerable, so avoid overspending. If that money is lost, it’s harder to recover over time. Look for investments with more predictable sources of income. Keep in mind, the more predictable the income, the lower the potential returns.
2. Plan for rising prices
Inflation can eat away at the buying power of your retirement funds. When planning for retirement, assume prices will go up and develop a strategy to account for that.
3. Talk with your spouse or significant other about how much you can spend in retirement
Be open and honest with your partner about how much you think you should spend in retirement so you’re both on the same page. Like any other large purchase, you should talk through important retirement financial matters as well.
4. Focus on physical health
In light of increasing health care costs, focusing on physical health today is critical to remaining physically fit in retirement. This cost is often overlooked by retirees, despite the fact that this cost is rising each year. Health care expenses can burden your finances when you consider the average hospital charge for coronary artery bypass surgery is $67,122.1
5. Put yourself on a budget
The best way to create a budget is to know how much you can spend. Unfortunately, most people don’t calculate how much they can safely spend each year in retirement. Consider using a budgeting worksheet and meeting with a financial advisor if you need help. Financial advisors can provide additional insight and tools to help you stay on track with your plan.
6. Find a good financial advisor
Having a financial advisor you trust could be a good way to plan for fiscal health in retirement. Talk to friends. They may have recommendations. Referrals can sometimes be the best way to find reliable financial education.
7. Pay off your mortgage
According to the Employee Benefit Research Institute, 27% of families with a head of household 75 or older still had a mortgage in 2016, compared to just 9% in 2001.2
Your mortgage is a significant part of your fixed expenses. By paying it off, you eliminate a sizable monthly cost and open that money up for other uses.
8. Work longer
According to the 2018 National Retirement Index, even if people work to age 65 and annuitize their financial assets, 50% are at risk of being unable to maintain their current standard of living in retirement.
One way to help ensure you have sufficient money further into retirement is to work a few more years beyond what you originally planned. Though maybe not ideal, it could add more financial cushion in the long-run.
9. Anticipate spending more than planned
No matter how much you plan, surprise expenses are inevitable. Budget for them, along with things like property taxes and maintenance on your home.
The good news is, making a few changes, such as working longer, saving just little more each month and adopting health habits can potentially make a big difference. Talk to a financial advisor about how you can prepare.
1Healthcare Blue Book. www.healthcarebluebook.com. Accessed June 6, 2018.
2Employee Benefit Research Institute. Issue Brief No. 443. March 5, 2018.