As you get closer to retirement, you may begin to ask, “How do I maintain my standard of living through retirement?” This is a complicated issue to answer as you start to unpack it because retirement isn’t always linear. You don’t always spend an even amount throughout retirement, but oftentimes when we plan for retirement, we plan a linear curve with expenses increasing for inflation. The reality is the way that retirement actually plays out is different for every individual.
Be Careful of the ‘Every Day is a Weekend’ Mentality
When people first retire, they’re really eager because they have all this newfound time and want to go out and spend it. In other words, every day is a weekend now! People start thinking about all the things that we’ve been dreaming of that they can now use their time to do. The travel trips they’ve been planning for years, tackling the gardening project in the backyard, and the epic golf or hunting trip or whatever it may be for you.
For most people, this mentality means the beginning of retirement usually involves faster-paced spending. Then, that curve tends to slow as they begin to slow down and come into retirement a little bit more. Sometimes it will spike back up at the end based on medical expenses or long-term care.
Plan for Your Ideal Retirement and Determine How Much You Can Afford
Some retirees end up spending more money during retirement because they have more time to travel and enjoy hobbies. Others may spend more because their health and personal situation requires extra care. On the other hand, many retirees enjoy staying home more and have even downsized their homes and lifestyles to help reduce expenses.
When doing your planning it’s important to stop and take the time to think through and design your ideal retirement.
Start with your ideal situation, even if, in the back of your mind, you think it would be absolutely impossible to achieve because you can always work backward. When we’re doing planning at Medallion, a lot of times we use a simulation tool to run through different scenarios. Think of it as a flight simulator for your retirement plan. If it crashes, we can crash in the simulator without having to crash in real life.
This can help you get an idea of what retirement would actually look like and you can begin exploring if the standard of living required to maintain your ideal retirement is really achievable. If not, we can work on deciding what steps to take to make it achievable or decide what sacrifices you’re willing to make so that you’ll have enough money to retire.
Small Sacrifices Can Make a Big Difference
Before you worry that you’ll have to sacrifice too much, consider the small ways you can live below your means. For example, cutting back on your morning coffee run or subscription services, limiting your dinner dates, or being more mindful of your spending.
You can think about your own future lifestyle and retirement goals as a vital part of your retirement planning. Take a good look at your current budget and think about which things you might spend more or less on every month. Also, remember to factor in inflation, especially if you live in an area with rapidly rising living costs.
Before you can answer if you’ll be able to maintain your standard of living in retirement, you need to determine what your standard of living is going to look like. A trusted financial planner at Medallion can help you figure that out.
Contact us today and let’s have a conversation! Click here to schedule a free consultation.
At Medallion Financial Group, we believe financial planning is about Family. We have been helping families invest in the future since 1987 through a holistic planning approach. We recognize there are a variety of needs when it comes to retirement planning, plan rollovers, annuities, college planning, life insurance options, and investment management. It is easy to get lost in a sea of choices. Our financial advisors help with the basics and beyond to enable our clients to get the education, advice and management they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client expectations – because we have high expectations of ourselves.