What's enough?
It’s the big question: When will I have enough money to stop and relax? Like with a lot of things in finance there aren’t simple answers that work for everyone. Although there are some rules of thumb that can be helpful to you get to a ball park figure this first question should lead you to a bigger and more important questions: What do I want to do in retirement?
If you assume that you’re going to want to do what everyone else is doing you might be surprised! The University of Michigan conducted a study in which over 20,000 retirees were interviewed. Less than 50% said they were very satisfied.
Working out your values
More people in retirement are finding satisfaction in different ways: starting their own businesses, founding non-profits, traveling, leading teams, secondary careers. It’s not to say that you won’t find satisfaction in buying a place in Florida and golfing 12 months out of the year but it could be a mistake to assume so.
Write a list of goals. Don’t be limited to think about the “traditional” ways of retirement. What have you always wanted to do? Who do you want to spend time with? Where would you like to go?
Working through this process your retirement goals are likely to look completely different to everyone else’s – and that's OK. In fact it is exactly what you want. A retirement plan 100% aligned to your values.
Work backwards from the plan
There are a lot of expense calculators and retirement predictors that can be found online and although they can be useful to a point those aren’t going to help you get clarity on what is needed to reach your specific goals.
Instead, take the largest retirement goals you have and calculate the costs associated with them. Then build a retirement budget and work backwards to understand how much you will need to save in order to reach your goal.
Having a retirement budget helps you understand how much you’ll need to save in order to retire in the way you want to. It also helps you manage your budget in retirement so that you won’t run out of money after a few years.
Be ready to adjust
There may be some things that are just too expensive to accomplish in retirement with your current plan. There are a few ways to address this. Saving more in the run-up to retirement will improve the likelihood that you will be able to accomplish more things on your list. It’s also possible to look at cutting some expenses in retirement – such as downsizing your home if you plan on travelling extensively. Another approach is to consider working part-time during retirement to increase your cash-flow.
Just as you’ve prioritized your choices and made sacrifices pre-retirement, it may be true that you need to prioritize your values and goals during retirement and build a budget that will work to those priorities.
Live a Fulfilling Retirement
The way to live a fulfilling retirement isn’t simply to save more. The way to do this is to build a plan that aligns with your values accompanied by a budget and savings plan to get there. Don’t get stuck in retirement trying to live by somebody else’s rules. You’ve worked hard to reach retirement – you deserve to spend it in a way that provides you fulfillment. Build something that is going to leave you feeling like you are living the life you have always wanted.
Need Help?
Aberdour Investments would love to come alongside you and help you identify your unique retirement goals and to plan and budget for them accordingly. Contact us today to learn more about how we work, and how we can get you on the path to a fulfilling retirement.