The fear of not living comfortably in retirement encourages many to sock away millions for retirement. “Unfortunately, that same fear can cripple them when retirement years finally arrive,” said Former Nationwide Financial President David Giertz.
“Those who retire with ample savings may not have had generous salaries,” said Giertz. “Instead, many were fervent savers.”
That habit of saving money can be difficult for them to break, even though they may have spent their entire adult lives saving for a retirement home, leisurely travel and spoiling grandchildren.
How does one make that transition into retirement, knowing their working years are behind them? “The key is to use that same discipline to create a budget showing exactly where your money will go,” said Giertz. “Start by deciding what is most important to you.”
While everyone’s retirement dreams vary, there are nine categories you should consider:
1. Eliminating Debt
If you still have a mortgage, a car loan or credit card debt, using retirement funds to eliminate debt can save you money in the long run since you’re paying interest on those accounts. If your home needs repairs and you plan on staying there, this is also the time to have work completed.
2. Long term Care
If you do not have a long term care insurance policy, long term care insurance companies estimate you’ll need $500,000-$750,000 during your lifetime. It may be more logical to invest in a long term care policy.
Even though you may qualify for Medicare, you will still be responsible for premiums, deductibles and coinsurance. Seniors should also consider dental care, eye care and hearing aids. The Kaiser Family Foundation estimates retired seniors on Medicare spend roughly 15 percent of their monthly budget on healthcare.
4. Travel and Enrichment
Most retired seniors have some plans to travel. Now is the time to plan those vacations and create a budget for each destination. Be sure to include additional travel expenses for regular trips to visit family. If you’ve been waiting for years to take that painting class or learn how to hula dance, you’ll want to consider those costs as well.
5. Monthly Expenses
It’s relatively easy for seniors to average monthly living costs. Be sure to include taxes and entertainment.
It’s important to most seniors that they not burden their family in their later years. Prepaying for funeral costs often gives seniors a great deal of peace. Will your children inherit your six spoiled cats? Make provisions now. Set up any college funds or trusts for grandchildren. Or, rather than earmarking money, you could buy a life insurance policy. “While premiums may be expensive, buying insurance allows you to spend your savings with less worry,” said Giertz.
There will always be emergencies, whether it be a leaky faucet or a broken radiator. For these situations, many seniors want a large cash reserve on hand. Emergencies may also include helping your grown children in a difficult situation. However, don’t live in fear of the unknown.
One of the most rewarding parts of having substantial wealth is sharing it. Your heart may be telling you to start an endowment, honor a loved one with a memorial scholarship, or contribute generously to a church building fund. If you want to make a difference in your community, include this in your budget.
Rest assured that your figures do not have to be exact because they will likely change over time anyway. Plus, your retirement savings will continue to grow, so any slight error should not matter.
Spend the first few months of your retirement deciding exactly how you’ll enjoy the next season of your life. Once you have a plan in place, it’s much easier to relax and enjoy your retirement.
“You cannot possibly foresee every circumstance ahead of you,” said Giertz, a prominent investor in his personal life. “However, a little planning can ease your fears.”
About David Giertz:
With over three decades of experience in progressive financial services, David was recently named President of Nationwide Financial. During his time at Nationwide, he has led strategy and distribution for private sector retirement plans, specialty markets, mutual funds, life insurance and annuities. David is also a Certified Business Coach with Worldwide Association of Business Coaches. Follow David on social media, including Twitter and learn more about him via his CrunchBase page.