Retirement Plan

Most of our lives we hear the wisdom of saving for retirement. It is a top of mind issue for almost everyone, especially senior people.

It is a mistake, as a 50+ year old person, to begin thinking about a savings plans with only a ten to fifteen year horizon before retirement. Actively managing your savings must be a priority from an early age to successfully have sufficient retirement resources throughout your life.

A well managed savings plan is just one dimension of good retirement thinking. Most seniors want to engage their retirement years not to quit and do nothing, but to enjoy a new found freedom and enjoy all aspects of life.

Effective retirement strategies include the personal freedom to spend money that was carefully saved over the years as well as preserve some funds for heirs. First, you must take care of basic living expenses. Then you can enjoy the splurges that often occur. Finally you can position funds for heirs that will offer them a better future.

Unfortunately most seniors lack the ability to enjoy this level of flexibility during retirement. If, for whatever reasons, you face retirement with limited funds, you will likely exhaust your personal money and be forced to rely on various welfare programs offered by state and federal government.

Beyond this harsh reality you must also hope that you possess the skills and physical capabilities to continue working much longer than anticipated. If this scenario is what your are likely to face, then begin now to alter your spending habits and start saving more.

The question that almost every senior faces when standing at retirement’s door is how much money can I afford to spend annually without running out of money? The final answer is personal but a key tactic is to minimize your basic living costs so that you can do some of the activities you really want to do.

As you think about income and expenses, recognize that early retirement years will be the most active and expensive in terms of adventure and fun. This is when personal discipline is needed to avoid taking too much of your resources too early in the game.

And it is important to keep in mind the later years of retirement often bring greater demands on your resources from growing health and medical costs.

Too often when seniors attempt to look into the future and project how much their savings plan will be worth, there is a tendency to over estimate the potential yearly return you may achieve.

For example if you have saved $500,000 and you project a 10% annual return bringing you $50,000 of personal income, you may breath a sigh of relief and pat yourself on the back for your investing skills. But if you are too optimistic you may dramatically miss your funding goals. If you are invested in stocks, it may be safer to assume a lower rate, say 4-6% which is a bit lower than the annual rate the market has delivered over long periods of time.

If you invest in safer investments with more predictable and safe rates of return then you can align closer to historical returns for your particular investment category. Preparing to live on less and hitting above expectations will be a pleasant outcome and your pain will be lessened if some kind of unexpected economic crisis occurs along the way.

The uncertainty of the future keeps most seniors in control of basic spending especially the people that have been disciplined savers their entire life. Keeping these habits in tact even in retirement is critical. Don’t let up and splurge yourself into a major problem.

Look for ways to save pennies for personal luxuries by carving them out of monthly expenses if possible before you tap your retirement funds.

Finally, pay attention to shifts in your personal preferences. You may have dreamed about world travel only to find yourself hating planes and travel hassles in retirement. But in retirement you may discover photography and dive headlong into a new found hobby. These shifts in personal interests may require changes to your retirement plans. Flexibility is the key.

Let your retirement be driven by your lifestyle choices but stick with the fundamentals of good personal finance to ensure you have the funds to take the entire life journey.

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About The Author:

For more than 20 years, Karl Edmunds has been a noted author within the business and management consulting arena. As a senior, he now engages his curiosity and observations about life to write about key issues of importance to the growing community of seniors (Boomers), and the value of living life to the fullest every single day. Give me your comments and suggests at http://Plan-Retirement.org or http://For-Seniors.org

Retirement Plan