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.
Top 10 List of Retirement To-Do's
Monitor your investments in pre-retirement
Money needed 5-10 years into retirement is most vulnerable, so avoid overspending. If that money is lost, it is harder to recover over time. Look for investments with predictable sources of income, but know that the more predictable the income, the lower the return.
Plan for rising prices/inflation
Inflation and rising prices can eat away at the buying power of retirement funds. When planning for retirement, assume prices and inflation will go up – and plan for it.
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.
Focus on physical health
In light of increasing health care costs, focusing on physical fitness today is critical to remaining fiscally fit in retirement. The high cost of health care is often overlooked by retirees, despite the fact that this cost is climbing each year. Health care expenses can certainly burden your finances when you consider that the average hospital charge for coronary artery bypass surgery is $63,648.1
Put yourself on a spending budget
The best way to plan a budget is to know how much you can spend, but unfortunately, most people do not calculate 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.
Get a good investment professional
You go to the doctor as a smart way to stay healthy, so having an investment professional you work with regularly is a smart way to plan for fiscal health in 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.
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.
Pay off your mortgage
According to the Federal Reserve Board and its Survey of Consumer Finances, almost a quarter of families (24.2 percent) with a head of household age 75 and up still had a mortgage in 2010, compared with just 5.8 percent in 1989.
Your home is more than just shelter, it also comprises 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.
According to the 2012 National Retirement Risk Index, even if people work to age 65 and annuitize all their financial assets, more than half are at risk of being unable to maintain their standard of living in retirement.
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.
Anticipate spending more money than planned
No matter how much you plan, surprise expenses are inevitable. Budget for unexpected expenses, as well as such costs as property taxes and household maintenance costs that may go up dramatically during retirement.
The good news is that making a few changes, such as 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 about how you can prepare.