As a baby boomer, retirement is either right around the corner or has already begun. You’ve saved, invested and contributed to your social security fund, but your monthly “income” still may not be as high as when you were working.
Many experts say to spend about 4% of your retirement nest egg per year. But, for some, that doesn’t amount to much. Even if you have a healthy nest egg, you’ll probably still have to make your money stretch further than you are accustomed to.
Before you reach retirement, calculate how much you have in savings, investments and social security. Look online for retirement calculators and online planners, or hire an advisor. Once you have an idea of how large your retirement nest egg is, develop a retirement spending plan.
A flexible spending plan is probably the best choice because you won’t necessarily spend the same amount each year of retirement. Make a list of your retirement dreams and decide when you’ll want to do each one.
Typically, retirees spend more time traveling and doing other activities early in retirement when their health permits, so plan to spend more during this time. Spending usually slows down mid-retirement as health declines, but peaks near the end when medical bills are a major expense. Plan your budget accordingly and decide how much you plan to spend each year.
What’s Really Necessary?
Once you have a set monthly income, prepare a budget. First, budget for necessary expenses. With what is left over, budget for discretionary items such as travel and entertainment. Your “discretionary items” budget may not allow you to spend carelessly, so be thrifty. Many retirees automatically spend less because they have more time to cook at home and they do less driving because they don’t have to commute. But, you’ve probably been dreaming of doing many things in retirement, so figure out a way to do them without blowing your money in the first year.
If you’re like most retirees, travel is at the top of the dream list, so travel smart. Look for online deals on airfare and hotels. At restaurants, take advantage of senior discounts and go for the early-bird specials. Travel during off-peak seasons. If you decide to travel by air, take red-eye flights. If you plan to travel in your own car, get a fuel-efficient one. Travel to visit family and stay with them instead of in hotels. Try a house exchange or buy an RV and take your “home” with you wherever you go.
Retireme nt Activities Close By
You can also enjoy numerous retirement activities right in your own city. By being creative and flexible, you can find numerous free activities that are fun and rewarding. You’ll want to take time for purely fun activities like golf, tennis, movies, and other entertainment, but fun will only take you so far.
You’re used to a rewarding job, so look for activities that will be rewarding to yourself and others. Spend time with your family by visiting them or babysitting grandchildren. Volunteer at a non-profit organization to give something back to your community. By volunteering at sports or entertainment events, you can even get free or discounted tickets.
Take time for your favorite hobbies that you previously had no time for or develop new hobbies. You can even turn your hobbies into a money-making venture by selling things you make, teaching or getting a part-time job. Continue to challenge your mind by taking a few continuing education classes at a college or university, checking out books at the library, listening to podcasts or reading online articles that interest you. Also, take advantage of free or cheap cultural or entertainment events at your local college or university.
Save money on housing by moving into a smaller home in a cheaper area of your current city or move to a cheaper town. Many cities have retirement communities where you can enjoy socializing with other retirees. You can also refinance your mortgage if you still have one or try a reverse mortgage if you need the money.
Adjust, Adjust, Adjust
Adjust expenses such as health care and insurance. At the beginning of retirement, you’ll be healthier, so look for a low-premium plan. Negotiate lower car insurance rates since you’ll likely be driving less. You also won’t need disability insurance, and you can reduce life insurance. You may even be able to downsize to only one car, which will save you money on gas, insurance, payments and maintenance.
Track your expenses and adjust your spending frequently. Retirement is your reward for working your entire life, so enjoy it, but also be smart about your spending to ensure that your retirement nest egg lasts throughout your entire retirement.
About the Author: Alex Shelton is a freelance writer for Become.com. Become is a price comparison and product review site that helps consumers find the best product and great deals. From Nike soccer shoes to a littmann stethoscope, you can find reviews and prices for pretty much anything.