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How To Live Comfortably In Retirement

Will You Ever Be Able to Retire?

HOW TO LIVE COMFORTABLY IN RETIREMENT

HOW TO LIVE COMFORTABLY IN RETIREMENT

 

 YouandYourMoney.com.au

Your retirement depends on your financial success — but financial success is part reality and part perception.

In fact, if you moderate what you perceive as financial success, you could improve the financial reality of your future.

It’s particularly important to consider this as you approach retirement, but this dynamic actually starts well before you’re ready to retire. It has to do with what kind of lifestyle you think you need.

People tend to raise their lifestyles as their income levels rise, but taking this too far can be destructive to both the perception and reality of your financial future. To understand why, just look at the arc household income tends to take over the years.

Factors to Consider

You might expect income to decline somewhat as you enter your retirement years, but a 60 percent drop could come as a shock to your lifestyle. The continued decline upon reaching age 75 implies that resources become even more limited as people move through what has traditionally been thought of as the golden years or retirement. That decline is partly because more and more of this population is unable to continue to work, but it also suggests that retirement savings may start to run out as people age. 

Age & Expenses

A traditional financial planning assumption is that retirees need less income than people in their working years, and to some extent this is true. For the most part, retirees are no longer supporting their children, their homes are often owned outright, and they no longer have to save for retirement. However, figures from the Bureau of Labor Statistics show that the drop-off in expenditures in people’s retirement years is not as great as the drop-off in income. Read more… How to live comfortably in retirement

Income level and lifestyle

A traditional financial planning assumption is that retirees need less income than people in their working years, and to some extent this is true. For the most part, retirees are no longer supporting their children, their homes are often owned outright, and they no longer have to save for retirement. However, figures from the Bureau of Labor Statistics show that the drop-off in expenditures in people’s retirement years is not as great as the drop-off in income. Read more… How to live comfortably in retirement

What income level is the basis for your lifestyle? The impact of age on household income and expenses is important to remember as you consider how closely to tie your lifestyle to your current income. Unless you are prepared to cope with a substantial decline in your lifestyle as you get older, it does not pay to link your spending too closely to your income as you enter those peak earning years of ages 45 to 54.

Unfortunately, many people not only raise their lifestyles to match their incomes, but they are lulled into a false sense of security by the trajectory of their income growth. Seeing their incomes rise steadily as they move through their 20s, 30s, and 40s gives people the impression that they will continue to be better off financially in the future. Consequently, they tend to believe they can afford to take on debt now and pay it off when they are earning more later. Read more… How to live comfortably in retirement

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