The way we budget our money and plan for the future necessarily changes over time. When we’re younger, we often take on some debt for education, to buy houses, or to otherwise invest in our long term goals. In mid-life, we hopefully approach our earning peaks and pay down (or off) our old debts while raising our own families (often taking on new debt). Once our nests are empty, we can start looking in earnest at how we want to retire. Hopefully, we’ve been putting away something for this time as we moved along.
Our ideas about retirement are likely to change over time, and really change when we start to make a budget for our “fixed income” years.
Think for a moment about your vision of retirement. To start, add up 25 years worth of realistic retirement income and add your other assets (social security, IRA’s less taxes, plus savings and other investments like home equity, stocks, and collectibles), then divide by 25 to get a rough average annual available allowance. Now think about your annual expenses (housing, food, transportation, recreation, and medical including insurance). Can you stay in your current home? Will you be able to buy a new car when you need one?
So what things are non-negotiable in your retirement budget, and what can you do to assure you will have them? What things do you think you might change to make retirement more comfortable? (Ideas: a smaller home or car, shorter vacations, eating more meals at home?)
As part of my retirement theme, I offer this weekly Thursday “Future Challenge” to get people of all ages thinking in general about their futures and/or retirement. Each challenge goes with a post of my own on the same general topic. Hopefully we’ll start some interesting discussions!
If you’d like to share what you think, or post on it, that’s great – and I’d love it if you’d share those thoughts in a post or comment (please tag posts TRS Future Challenge and link to this post) so others can also see them.
If you choose not to share them, that’s fine too – but with any luck, you’ll still gain some insight on where you’re headed (or would like to be), and how you can get the most out of your own journey.
To see my own take on this week’s challenge, see my posts That’s the Way the Money Goes and A Little Bit of This, A Little Bit of That.
Here are a few related posts and articles, along with the ones listed in my post referenced above… a lot to think about!
- 5 Ways to Make Retirement Feel Real (minyanville.com)
- CashNetUSA | Top 5 Ways to Manage your Money after Retiring – CashNetUSA (cashnetusa.com)
- TurboTax – The Golden Years Guide to Tax-Free Retirement (turbotax.intuit.com)
- Retirees Will Spend Final 7 Years in Poverty, Study Says (thestreet.com)
- CashNetUSA | Personal Tips for Saving Towards Retirement – CashNetUSA (cashnetusa.com)
- Will You Be Able To Retire At 67? (nationaldebtrelief.com)
I think that debt free need to be on top of the list.
An excellent point. I usually harp pretty hard on lowering or getting rid of debt, but I weave it into other things – I probably should do a post just on the impact debt can have! This post covered it a little, too: https://theretiringsort.com/2013/02/07/a-little-bit-of-this-a-little-bit-of-that/
I guess we were odd in our retirement plans. We “retired” every 10 years by taking a year off work and traveling. We traveled dirt cheap..camping for free in all the National Forests and throughout Europe. We finally started saving when we were in our early 40’s. We bought cheap, run-down houses or built our own. The only new piece of furniture we ever bought was a couch that our puppy destroyed the first night we let her out of her sleeping crate. Second hand stores were our malls. I got undergraduate and graduate fellowships and never had to pay for university tuition. We didn’t have a credit card until we were in our 40’s. Then, we paid the bill in full monthly. We learned how to charge everything for the free sky miles and took countless free trips. We became debt free rather easily because we never bought anything new. In our mid-50’s we got tired of teaching..the bureaucracy nearly killed us. We knew it would be difficult to live in the states on our small teaching pensions, so we moved to a tropical island in Nicaragua. We can live comfortably on $500 a month, but we love to travel so it is usually around $1,000 a mo. We have excellent health insurance from an award winning expat hospital, we built two houses on our beach front property, we have a big year-round garden and dozens of tropical fruit trees that supply us with our food, 10 chickens for eggs, and finally this year I’ll turn 62 and be able to collect my SS. I can’t wait..it’s going into our travel funds. I think the key to a successful retirement is not so much in the planning, but in the living simply and always being satisfied and resourceful with what you have.
Well said! We don’t have to buy everything we see, and we need to make choices rather than trying to have everything. It sounds like you are not only enjoying your retirement, but you’ve had a wonderful journey getting there as well – well done!
Lots of food for thought… This is a very important guide for planning ahead.
Thanks, Elizabeth. My husband read an article last week that said only about 30% of US boomers think they’ve saved enough for retirement. Yikes!
Here are the decisions we made along the way that really helped us with adjusting to retirement.
1. We saved money even during our early, tight budget years. In the 15 years before I retired I put the max allowable in my retirement plan with 10% from my employer. This really helped.
2. We engaged the help of a financial planner who we trust. He helps with investing decisions and tells us how much we have available to spend each year and still have enough to take us 20 years down the road – or longer. We are moving all of our money to this organization so we can always have a feel for the total picture.
3. We became debt free – meaning we pay cash for cars and paid cash for our retirement homes. We have always paid credit cards in full each month so we don’t waste our money on interest.
4. We never had high paying jobs so we never adopted a high lifestyle. It helped that we lived in an area with a relatively low cost of living – except for utilities in winter. We made sure our houses were energy efficient to keep that bill low. We have always been careful with our money but also do things that are important to us. We have prioritized what we want to spend our hard-earned money on.
5. Our biggest adjustment was moving from a saving mode to a spending mode. We always had reserve accounts and knew that when we made a major purchase we would be about to put the money back into our reserve. Now when we make a major purchase, the money is gone. We don’t rely on income from investments because we learned they aren’t guaranteed!
I hope this helps some of you – especially those who are in their peak earning years so you can prepare. We now feel very secure and are having a lot of fun in retirement. The information shared in this post and the linked post is right on!
Pat, thanks for sharing your monetary path to retirement. I need to share these with our son. lol
I’ve got a daughter that I should share it with, too. 🙂
Thanks, Pat! These are all great models. We feel the same way about debt and we always maximized our employer contributions to our 401k’s. Common sense and early planning can go such a long way – my thrifty Scottish Nana always said, “If you can’t pay for it, it isn’t yours to buy.” My dad was a bit of an impulse buyer, and she shook her head a lot!