Money and the importance it’s going to assume in your twilight years will not be the same post retirement. Find out how it will influence your spending habits.
According to research and financial experts, one should look to accumulate a sizeable retirement corpus to take care of your needs once you hang up your boots. However, realistically speaking, how much money you need to save up for your retirement corpus would depend entirely on your present lifestyle. So at the moment, if eating out every other day or spending weekends on shopping sprees constitute your lifestyle, you will need a major rejig to keep your finances afloat post retirement.
Here are some changes you can expect in your lifestyle post retirement:
1. Healthcare spends will rise:
You might be a health freak today, but someday life will catch up with you. With time, health is likely to take up more resources and time than it is today. As you get older, your Health Insurance premiums will also increase.
Getting rid of Health Insurance may not be the answer because the older you get, the more likely you will be in need of medical attention.
So, when budgeting for retirement, you’ll want to give yourself a buffer for increased healthcare costs.
Additional reading: 5 Top Rules For Retirement Savings
2. No stable income and more spare time:
Unless you’re planning to work as a part-time consultant post retirement, you’re going to have a lot more free time than you do now.
Retirement leaves you with plenty of time on your hands to pursue things you always wanted to but couldn’t find the time for. Now’s when all those all-nighters and extra working hours should pay off. With more time on your hands, you can carry out household chores for which you had hired help before. The frequency of eating out or ordering in will also drop as you get more time to cook for yourself and your family.
Despite the fact that you won’t have a regular stream of income, having more spare time on your hands can significantly lower your cost of living.
Additional reading: Are You Saving Enough For Retirement? Find out.
3. An empty nest:
If you’re currently a parent, a large proportion of your monthly expenses will no doubt go into keeping your kids well taken care of. When you retire, your kids will hopefully be all grown up and capable of supporting themselves. That means you won’t need to factor in child-related expenses into your retirement budget.
Beware, however, of relying on your kids as a source of income during retirement. With rising inflation and higher standards of living, young millennials today are becoming financially pressed, and it doesn’t make sense to assume that your children would be able to support you.
4. Changing entertainment needs:
The things that get you all excited and pumped up as a strapping youngling will start appearing mundane as you grow older. You might be blowing all your cash now on alcohol and clothes, but when your liver has failed and you can barely get out of the bed, such costly forms of entertainment might seem less attractive than an evening watching football on the TV.
On the other hand, if you’ve spent a good part of your youth slogging away and want to use your retirement years to travel and finally see the world, you could well end up spending more, at least in the first years after you retire.
Additional reading: 5 Best Investment Options For Retirement
5. Paying someone to take care of you when you can no longer do so yourself:
Old age brings with it the very real possibility of deteriorating health. There will be a point when you won’t be fit enough to take care of yourself. You might want to thus start thinking seriously about what kind of caregiving you can afford when you reach that point.
In this case, too, it’s important to consider that your children cannot and may not want to take care of you. Not only will they have their own careers and family to be take care of, but may even be residing overseas. More practically, they may not be able to give you the kind of specialised care or medical attention you will need.
After considering all the above factors, look at the figures you’ve come up with. Here’s news: thanks to inflation, these figures could double or triple by the time you retire. We’re not fortune tellers, so we can’t predict the inflation rate. But assuming an inflation rate of 5% every year, it’s a safe bet to budget for 6-7%.
Additional Reading: How To Beat Inflation
Retirement savings is a lifelong process but it can be put in place by adhering to simple rules. While saving for retirement, one must desist withdrawing from one’s retirement fund before retirement.
Compounding works best only if it is not withdrawn mid-way. A disciplined and committed approach to retirement savings are prerequisites to a good retirement fund.