A successful retirement is possible for almost everyone. However, according to the latest COUNTRY Financial Security
Index, 81% of Americans are worried that they will not have a successful retirement. For most people, a successful retirement is one where:
- You don’t run out of money
- You can afford an acceptable lifestyle
- You can pay for healthcare
A successful retirement is within reach…
With the right preparations and mindset, you can have a successful retirement. Here are three easy guidelines for a successful worry free retirement:
“If you want a successful retirement, you need to create a thorough and thoughtful retirement plan and you need to stick to it. A lot of people don’t want to have these conversations and all of the planning is a pain, but you just have to do it,” explains Michael Ruzhansky, founder and CEO of Iron Dome Financial Group, located in Princeton, N.J.
The trick with retirement planning is that there are a lot of inter related levers. Too many people seem to focus on figuring out how much they need or when to retire. However, almost anyone can retire at any date with any amount of money, if they are willing to live on a more limited budget.
A good retirement plan looks at all of your available resources (savings, Social Security, home equity, willingness to work, pensions and more) and combines those with your goals and priorities (where do you want to retire, when, how much do you need to spend each month, what do you want to do). Any shift to any one of these levers will impact everything else.
Online retirement planning tools can be very helpful for managing these complexities. But you’ll need more than a simple retirement calculator. A thorough tool like the NewRetirement retirement calculator is easy to use, but very detailed.
You can also work with a financial planner. “Even if it doesn’t seem like paying an advisor is in the budget, a flat fee even for a simple retirement plan is absolutely worth it,” explains Ruzhansky.
Another important thing to do once you make your retirement plan is share it with your adult children. “You don’t need to tell them all of the specific numbers, but keeping them informed in case something were to happen will be extremely helpful,” Ruzhansky says. “Don’t just sit around and hope for the best.”
The retirement model, post World War II, revolved around pension plans and Social Security that people could live off of until the end of their lives. But that model has completely changed over the years, Ruzhansky points out.
“The retirement plan models that were built even 20 years ago are out of date now,” he says. “I always tell clients that a financial plan is surprisingly outdated the moment I get done putting it together.”
There are a few big changes that are causing the retirement planning models to shift, according to Ruzhansky. One is that people are living much longer today and this can mean higher health care and long-term care costs. Affording these costs is the third of the top three fears that Americans have about retirement, the index found.
Another change that Ruzhansky points out is that fixed income portfolios, which can include bonds and money market securities, don’t work very well anymore because the interest rates are rising. “And once [interest] rates start going up, the value of your portfolio goes down,” he says.
Overall, investing in an independent retirement account (IRA) is the safest way to save for your future that can be flexible as the model of retirement plans continues to change.
Be sure to plan for long lives and keep revisiting and updating your plan.
People are remarkably resilient and luckily, in retirement, flexibility can sometimes make up for not being able to spend as much.
If you happen to be in retirement already and see your nest egg depleting faster than you expected or planned for, don’t worry. There is still hope, explains Ruzhansky. “It really comes down to reevaluating where you spend your money and sometimes downgrading,” he says.
In a perfect world, you would be watching what you’re spending in retirement as well as leading up to it, but life has unexpected expenses that come up.
Among Ruzhansky’s clients, one couple who retired in 2007, right before the market crashed, lost about 40% of what they had saved for retirement. “They had about 5 million dollars in investable assets before the crash and they had to sell a lot when the market was really bad,” he says.
The couple did not come out of retirement, they simply shifted priorities and lived a little smaller. “It came down to downgrading…taking less trips to the mall because these kind of losses are not easy to recoup from.”
When planning, it is good to know that spending less is simply a part of aging. Retirees tend to spend more when they first retire, then less as they begin to slow down although spending spikes for healthcare expenses at the end of life.
If you can stay informed and on top of your retirement plan, you can create more options for yourself down the road. There will always be certain things that are out of your control, but if you keep an eye on your finances from day one, those unexpected expenses down the road will be less detrimental to your retirement, and could help you avoid catastrophe.
Get started with an online retirement plan today. The NewRetirement retirement calculator was recently named a best retirement calculator by the by the American Association of Individual Investors (AAII). Or, get matched to a retirement advisor to get help you might need.
