Retirement planning once was as simple as learning how to manage a monthly pension, or saving until you reached the "number" needed to live during retirement. Today, with life expectancies and retirement needs increasing, the conventional approach has shifted. You need to look beyond long-term savings to be sure your retirement funds will last a lifetime.
We face new realities every day that affect retirement savings, from changing workplaces and family circumstances to market fluctuations and extended life expectancy. The average American life expectancy is 82 years, up from 77 years in 2002, and someone who is 65 years old today has a 25 percent chance of living to at least age 94. Welcome to the "new normal."
This ever-changing environment requires us to revisit retirement planning, where income is only part of the picture. Your financial plan should be comprehensive, addressing your needs, helping you manage risks such as health care expenses and inflation, and guide you on how to make your assets last a lifetime. As you evaluate your resources and goals, you may need to make adjustments: re-think your retirement strategy, work longer, limit your expenses, or find other creative alternatives to reach your goals. Here are some ideas that can be part of an effective, long-term plan:
- Live Below Your Means
Conserving resources during your working years allows you to save consistently for retirement; it also helps to ensure you’re positioned to have sustainable income throughout your lifetime.
- Focus on What You Need
Stop and examine your lifestyle. At your current life stage, you may find ways to reduce the resources you use, the space you inhabit, or the energy you expend. You’ll save on expenses, as well as time and effort, when you pare down your living space, belongings, maintenance and transportation.
- Grow Your Own Food
Plant a garden, and you’ll not only enjoy the results of your labors, but you’ll have easy access to fresh, nutritious foods that can improve your health.
- Spend Carefully
You can work within your budget and have fun gathering what you need when you pursue online deals and coupons, refurbish resale furnishings or save your vacation dollars with house-swap websites and travel discounters.
- Explore Income Options
Rethink your retirement plan to incorporate several income streams, including guaranteed income such as a lifetime annuity to cover essential expenses, supplemental income from investments or retirement accounts, and/or optional income from part-time work or hobbies.
- Protect Your Income
Your long-term goals can be at risk if you become injured or disabled and unable to contribute regularly to your retirement savings. Disability insurance is essential to protecting your income, your retirement savings and, therefore, your retirement.
- Secure Your Family and Assets
If a breadwinner dies, life insurance benefits position surviving family members to be financially secure, protecting their future needs and helping cover taxes to preserve remaining assets.
- Create a Support System
Tapping community resources can help you achieve your goals more cost-effectively when you find ways to share or reduce expenses in areas such as transportation, local food sourcing, and energy efficiency. Check your local municipality or chamber of commerce to find organizations, online communities and other resources to meet your needs.
- Pursue Your Mission
Retirement opens up time for volunteer opportunities, whether they support community organizations, local events or your favorite charity. Some retirees relocate to do volunteer work for several months at a time, saving living expenses in the process, and enriching their lives with service to others.
A broad-based planning approach can provide you with direction, help your retirement dollars last, and guide you in using your resources responsibly. It starts with setting goals and making a plan for achieving what is important to you. A financial representative can help you think through your needs and goals, and develop the best long-term plan to address them.