Planning for Retirement: Managing Expectations
Please welcome a guest post from someone who connects cat shelters to retirement. Read on, friends!
After decades of hard work, that day will come—retirement. It is easy to lose perspective after spending so many years “being a grown up” and saving. Indeed, beyond old parables of the poverty-stricken elderly, it is hard to find cultural examples of comfortable yet modest retirees. The way we are supposed to see it, retirement is basically the spring break of life—go nuts! Splurge! Indulge yourself! However, you could find yourself in a world of hurt if you followed this advice. I am here to show you ways to readjust your expectations and begin looking forward to a wonderful autumn of life that doesn’t involved potentially eating away all of your hard-earned money.
1) Take your time, if you can
Be aware that your retirement might come earlier or later than expected. Make sure to carefully research the policies and requirements for retirement as they are different per age bracket. For example, to be eligible for social security, you must be 62, but to take full advantage of retirement benefits, you must be either 65 or 66 depending on the year you were born. Similarly, for IRAs and Roth IRAs, individuals can withdraw money before the age of 59 ½, but you could be penalized for such. Make sure you consult your retirement portfolio to figure out what benefits kick in when so you can plan to retire effectively.
Although it is wise to try and push back date of retirement as far as possible, often due to health and injury, many individuals find themselves getting forced into retirement before they can take full advantage of their investments. Nobody can control fate and accidents, but you can save up to have some designated money in the event this misfortune hits you.
Ideally, insurance payments and employment benefits should help to ameliorate some of these costs, but don’t count on it. If you plan for it now, you might be able to keep yourself afloat until you can take full advantage of benefits—better some short-term belt-tightening than long-term loss.
2) It’s a funderful life!
Make sure you do your research and keep an open mind for extra sources of revenue during your retirement. For example, it is possible for qualifying seniors over the age of 62 to apply for a reverse mortgage, recently overhauled in April 2013 to make them more stable. These work similarly to home equity loans, except that instead of repaying for the duration of the loan, the money is, ideally, repaid from the profits after the house is sold. Careful review of opportunities like this can help make your budget a little more flexible when the time comes.
Likewise, many people decide to use house flipping as a method of additional revenue. If this sounds interesting to you, and you think you’re ready for some serious work, start researching flipping houses now. Don’t just build skill sets, either; make sure you build a knowledge base of what location would be ideal, how much money you’ll anticipate dropping on this investment, and if your timing is right.
Most importantly research, research, research—talk to friends and co-workers you know who are specialists in the arena you are interested in and listen to their advice. Consider hiring a reputable consultant to help you avoid any pitfalls.
3) Live on the edge, but not that way…
Like I said in the above section, more research is always better. Additionally, realize that once you are retired, you get with your AARP membership card a giant scam target painted on your back. If something sounds too good to be true, it probably is. In a recent article on Forbes, a report released from a recent crackdown on fraud found that the victims, of which seniors comprised a sizeable chunk, were scammed out of over $14 million dollars.
Another avenue that makes retirees particularly vulnerable to scams has to do with interests. A new life of travel is a hallmark trope of the retired life, and money sinkholes like timeshares are not only financial missteps themselves, they also open up opportunities for scam artists to take advantage of panicked people, desperate to undo their financial misstep.
Whenever you receive an offer or see a deal online that looks tempting, always search for its title and keywords like “scam,” “ratings,” or “reviews.” It might feel unfair to profit from someone else’s mistake, but the reviewers are often happy to help and undermine their predator’s credibility at any turn.
4) Make your Retirement Make Cents
One of the oft-repeated pieces of wisdom for retirees is to take into account your spending habits–really. A lot of retirees underestimate exactly how much money they are saving by being cooped up at work all day. Be honest with how you currently spend money and adjust accordingly.
A good starting point is to anticipate your retirement income to be 80% of your current income. Then, account for a few months of adjustment from your retirement to your eventual stipend; it is easy to get sidetracked how much you’ve earned “the good life,” and you do want to be able to splurge a little. Just make sure you account for it.
Additionally, come up with your ultimate picture of what you want your retired life to live, then tweak it with lower cost or volunteer alternatives. For example, my wife absolutely loves cats and she would own far more than we can or should sustain if I let her; in order to keep a stream of fuzzy friends with lower cost, we signed up to be a foster home for kittens and cats from our local cat shelter.
Many shelters provide monthly stipends to help offset the cost of cat care and upkeep. Other ideas include the following. Instead of buying those fancy box tickets at your local theater, offer to privately volunteer—for a little work, you can generally get in free to see the show. Instead of doing a major project overhaul of your garden and taking on all the cost yourself, volunteer to be the local gardener for your neighborhood and accept donations to spruce up the area.
I hope that these tips and reminders help you build a wonderful life as a retiree. It can seem overwhelming at the time, but slowing down and thinking out your plan will help you live to your fullest and leaving a positive legacy for your children.