Before Retirement, Try Spending Like a Retired Person
Millions of baby boomers just like you are approaching retirement with a great deal of doubt regarding what the future holds. That apprehension you’re feeling in the pit of your stomach is normal. Many things in your life are going to change, some good, some not so good.
Retirement is going to require lifestyle adjustments, so why not “test drive” your retirement?
Take a look at your financials and determine your retirement income balance against the debt you anticipate will still be with you at retirement. Armed with that information, start adjusting your spending habits now to determine the course(s) of action you will need to take between now and your retirement date.
Spoiler alert: It’s not as easy as it sounds
Why the Old Retirement Formulas Don’t Work
Related: Bridging the retirement income gap
It’s a very different world now, and old guidelines based on conditions that existed 30 years ago don’t necessarily reflect the realities of aging today:
- A male turning 65 years old today can be expected to live another 19 years, on average, compared with 11 years in 1970; women can expect to live another 23 years
- The chance of a retiree or an elder family member requiring some form of long-term care is now 7 in 10.
- Many of today’s retirees carry debt into retirement, including mortgages, consumer debt and student loans
- Although inflation has moderated somewhat since the 1970s, lifestyle costs such as housing, food and transportation consume a larger portion of a retiree’s budget today.
- Although health care cost increases have slowed, their rate of increases continues to be well above the general rate of inflation.
For many retirees, the 70 percent income replacement rule might be an acceptable baseline for planning; however, with the risk of inflation compounded by the longevity risk now confronting retirees, it’s not inconceivable that, for some retirees, their income replacement need could be as high as 100 percent.
Related: Because everyone needs a Plan B
The New Reverse Mortgage isn’t for everyone…but it could be!
If you’re still wondering if a Reverse Mortgage is the right solution for you but you’re not ready to sit down with one of our Reverse Mortgage Experts, then we’ll be happy to mail (or email) you Use Your Home to Stay at Home which is the official federally approved consumer booklet for those considering a reverse mortgage.
Some of this information first appeared on Next Avenue.com
From the desk of Greg Cook