How much retirement financial planning is necessary? When should you start saving and investing for retirement? How should you invest your retirement savings? Where do you go for advice?
The answer is...it depends on your financial planning goals for retirement, and your preferred lifestyle.
Richard, a good friend
of mine, enjoys the good life. He likes to dine in fine restaurants, and he
travels to exotic holiday locations. Perhaps he’s checking out the best places
“I found this little
known island in the Caribbean, you would love it Greg!”
Well maybe I would, I thought.
Richard was nearing retirement and he told me he was both saving for retirement and investing for retirement to continue that lifestyle in retirement.
He told me he was expecting a higher standard of living - and a better lifestyle - in retirement. He said he was saving and investing for retirement to achieve those goals.
As long as I have known Richard he appeared to
me to be a man who likes a structured and well planned life. He prides himself
on being organized, decisive and in control.
I have little doubt that he was up for retirement, both emotionally and financially.
By way of contrast, Joe - who I have known since high school, likes to "go with the flow". He enjoys a flexible and spontaneous lifestyle. I still see him rushing at the last minute to meet a deadline, as he was in school!
For him retirement would be a time for
mellowing, valuing spouse and children, and contributing to the community. And
yet he understood that you can’t retire without money.
“For me the question is not "how much money to retire?" - it's how little do I need to retire!” he quipped! Joe had a plan, a bit vague and flexible, compared to Richard, but nevertheless a plan.
“I can live on much less in retirement. We are empty nesters and the
children will not be coming back! We spent a fortune on their education, thank
god that’s over.
We will spend less on clothes - no more suits. I like to cook and will do a lot more when retired, so we will eat out less. We can probably make do with one car when my commuting days are over. Do we need a land line and two cell phones, and 100 TV channels? We really do have a lot of discretionary spending that could be reduced or eliminated.”
As we looked at my Retirement Planning Guide - I reminded him that some expenses would stay the same, groceries and entertainment - he was hardly going to cut back on his golf and the twice weekly visit to his local pub?
Other expenses would increase - health care, and travel if that was part of his plan.
He believed that he had
one very attractive option. He had a large house - they had three adult
children - and the mortgage was paid. Downsizing to a smaller home was a
possibility. This would lower the cost of maintenance and also give him a nice
little nest egg for investing or emergencies.
I asked him if he had discussed this retirement scenario with his spouse. “Sort of”, he replied. I urged him to talk it through in detail, especially the idea of selling and moving. I knew she was a very keen gardener, and loved their present house.
I also suggested he prepare a detailed budget, with the help of a financial advisor, find a Retirement Income Calculator and do some retirement calculations and check out his assumptions. Also consider the rules of retirement governing his pension plan and social security.
This would cover:
Knowing Joe, this was a task he would not enjoy,
but he agreed to report back to me on his progress at our next coaching
Both Richard and Joe’s stories illustrate that when it comes to retirement financial planning one size does not fit all. It is essential to incorporate your personal goals and lifestyle choices into the planning. Finally, it's never too early to start - as I discussed at at Retirement Financial Planning Coaching meeting with Peter.
In planning for retirement it is advisable to have more than one source of retirement income. The traditional sources are Social Security, Employer Pension, and Personal Savings. These sources are becoming less reliable. Governments are under pressure to cut spending, fewer employers are offering defined benefit schemes, and saving is difficult if you also have to pay off debt. The challenge is "to cut your coat according to the cloth", and balance your income and spending.
Have a look back over the article above - wherever there is a link in the story - you will find out more information on retirement financial planning.
Check out Tony Rovere’s informative article on maximizing your social security options to assist you in your retirement financial planning .
You may also be interested in reading this excellent story - both personal and pertinent - on Retirement Financial Planning for Women by Audrey Owen.
Perhaps you are considering buying a second home for retirement. Is this a good idea for you? Have a look at my own story.
5 newer retirement trends affecting your retirement financial planning. The changing face of retirement affects your retirement nest egg.
If planning your retirement nest egg one of your top concerns read this article by Rick Pendykoski.
Also, please feel free to contact myself to find out more about Retirement Planning and Retirement Coaching.