|
How to retire comfortably
|
 |
May 5, 2000: 11:41 a.m. ET
Figure out what you'll be spending your money on during your golden years
By Staff Writer Jennifer Karchmer
|
NEW YORK (CNNfn) - Do you dream of relaxing in a New England cottage reading romance novels by the fire during retirement? Or maybe you'd like to start that new career as a writer after 25 years as an accountant crunching numbers.
However you envision your retirement, you'll want to figure out now what you'll be spending your money on to live comfortably then.
Everyone's retirement dreams are different, but planning realistically will help you achieve those goals, financial pros say.
"Some financial planners are planning for 95 or 100 percent of your income today is what you'll need during retirement," said Louise Piazza, program consultant on economic security at the American Association of Retired Persons. "There are a bunch of calculations online, but they all use different assumptions. You can come up with these figures, but they may not be right."
Setting the stage
So how do you look into the crystal ball and figure out what retirement lifestyle is right for you?
The first thing to remember about retirement is that it can be decades long thanks to technology and medicine. It's no secret that Americans are living longer these days. So if you've got strong genes, and you retire in your 60s, you'll need a nest egg that will last well into your 90s.
Click here to read more about life expectancy.
Piazza points out that your costs during retirement will change as you age. When you retire at 65 you may be nimble enough to hop on trains, planes and automobiles, so a travel budge will be more important to you.
But when you reach your 80s most of your bills may be for home health care and drug prescriptions.
"My mother in her 80s, has, like, 20 prescriptions, and she spends $4,000 a year," Piazza said. "At various stages of retirement, you have various expenditures of needs."
Certified financial planner (CFP) Steven Kaye of the American Economic Planning Group in Watchung, N.J., adds: "Your needs now don't necessarily reflect those in retirement. You'll spend less on clothing (later) since you dress up for work now, but you may triple your vacation budget."
Of course, there are other factors that come up without warning that can affect your retirement income:
* Supporting children who move back home or
* Raising grandchildren unexpectedly
Boomers daydream about retirement
So you may budget for larger travel and leisure costs during retirement. But this is offset by having paid off the mortgage or college loans. And many baby boomers - the next generation preparing to retire - plan on continuing working into their later years, which will affect how they budget for retirement.
According to an AARP survey, 80 percent of boomers say they plan to work at least part-time during their retirement. More and more Americans are working in their later years because they enjoy their job and don't want to give it up. Many people, though, continue to work because they need the extra income.
And it just got easier to work during retirement. Lawmakers recently enacted legislation allowing seniors between 65 and 69 to continue working full-time and receive their full Social Security benefits. Previously, seniors were limited to $17,000 a year in earnings; above that their Social Security benefits were reduced.
Moving on and moving up
So if moving to a new location like sunny Fort Lauderdale, Fla., or to the mountains of upstate New York is in your retirement plan, then you'll need to figure out how your daily costs might differ from your current homestead. Your cost of living could be very different if you plan on playing golf at a private retirement club instead of the public course where you used to shoot nine holes, Piazza says.
So before you buy the new condo in, say, Scottsdale, Ariz., Piazza suggests you move to your new location temporarily to "try it out" and see if you like the people and can afford it altogether.
"It's a lifestyle decision, what can you live with or not," she said.
So whether you plan on traveling the globe during retirement or continuing your career in your later years, your retirement budget will need tweaking along the way.
"Don't go by these old clichés that the rule of thumb is you'll need 70 percent of your income," Kaye said. "It's a bunch of baloney. You're best served by not going by rules of thumb. Figure out what do you want and what are you goals." 
-- Click here to send email about this story to Staff Writer Jennifer Karchmer.
|
|
|
|
|
 |
|
