Nobody really wants to think about retirement. But the truth is, you really need to consider all the important options and lifestyle choices you must make BEFORE the paychecks stop coming. You want to be prepared when that day comes, not struggling to figure it out once it happens.
Some aspects of retirement you should start to consider (the earlier the better!):
1.) Saving vs. Spending – This is obvious. There will be no retirement without saving some money each month. But the difference between saving and spending the same amount of money is significant. In an article from our partners at BankingMyWay.com, Jeffrey Strain writes about Spend $10 Today, Be Out $100K Tomorrow.
In this article Jeffrey Strain explains the following:
“If a person were to save $300 a month (approx. $10 a day) and invest it to get a 5% yearly return, that person would have $20,402 in the bank after five years. On the other hand, if a person ends up spending $300 a month more than he has and puts it onto a credit card that he doesn’t pay off over the same 5 year period, that person will owe $36,259, assuming a 26% credit card interest rate. After five years, the difference between saving $10 and spending $10 each day results in a $56,661 gap in net worth between the two.”
When you look at it this way, it is easy to see how much money you are able to lose, even though spending $10 a day does not seem extravagant.
2.) Keep Your Will Updated – This is extremely important. Although many people (along with retirement) do not like to consider their own death, a will is your only way to make sure things run smoothly when you are gone. It also helps your family through the hard times if all of your decisions are put on paper and they don’t have to struggle to figure out what you would want. Check out this Geezeo article to get more information on the importance of your will.
3.) Lifestyle – Again, this may seem obvious but your savings really determine what type of lifestyle you will lead after you retire. Many people underestimate how long they will live and also how much to save per month. If you want to be able to live the same type of life, make sure not to underestimate these important aspects! You want to be able to travel and live an easy life…not struggle to make ends meet.
4.) Where To Live/Housing – This one is obviously no easy decision. Will you stay in the same house? Should you move to a community living area? Or do you want to move closer to your families? Or how about moving to warmer weather climates? All of these are important questions to consider and the current housing market does not make the decision particularly easy. According to an article on MainStreet.com by Lauren Tara LaCapra, it was found that baby boomers could really struggle with the housing market drop because it will be harder for them to change their spending and saving habits compared to those that are of a younger generation.
5.) Taxes – Regardless of if you have a steady income or not, you will still be affected by current tax levels. For instance some states have income taxes but will not tax your retirement income or your social security. Do some research; maybe you want to live in one of these areas to save some money!
These are just a few things to consider but obviously there is much more! Just make sure to plan EARLY. Being prepared for the unexpected will help you out the most in the long run.
Photo: Michael Connors
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