To be financially comfortable in retirement, the general rule of the thumb is that you’ll need approximately 80% of your annual pre-retirement income. Spending in retirement is a mixed bag. You can get by on less because some monthly expenses will drop, such as gas and maintenance for your commute vehicle. However for budgeting purposes, you should be aware that there will also be certain expenses that increase as well. Common lifestyle changes, like traveling and participating in other for-pleasure activities, can add to your yearly budget.
If you’re counting on netting some extra cash from a downsize of your home, you may be in for a surprise. After paying transaction costs, taxes, and paying off the mortgage, you may end up with less than you expected. Most folks choose to leave the large family home to save time and money on maintenance. It is possible to pull equity from the sale of your home by relocating out of the city or urban area in which you’re living to a more rural, less populated area. If your intention is to stay in the same part of the city or state, however, expect to make a lateral move in terms of home prices.
Doing more of what you love
With the extra time retirement affords you, you get the pleasure of spending it any way you choose. It’s a stage in your life that, with proper financial planning, can be the most joyous. Many retirees plan to travel and see the country or even the world soon after they leave the workforce. Other expenses that increase in retirement are those associated with enjoyable activities such as reading and charitable giving. Studies show that seniors are more likely than younger folks to contribute to political campaigns and other charities near and dear to their hearts.
And to stay in good health for the golden years, over half of all retired Americans participate in physical activity, which results in dedicating close to 15% of their income to fitness-related activities.
Taking care of you
While staying fit helps you live your best life as you get older, the reality of aging means that you will need to budget funds to cover additional health care costs that may occur.
Retirees can live happy, healthy and fulfilling lives long after they’ve left the jobs that once provided a sense of purpose. Blankinship and Foster encourages people to begin financial planning for this rewarding time, regardless of their current age. It’s never too soon to start planning for all of the everyday expenses you’ll need and all of the things you want to do when your time is completely your own.
Call today to set up a consultation, and we’ll help you design a financial plan that will ensure that you’re able to reach your retirement goals.