How To Retire Comfortably

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 10 minute read

It’s good to be out of the rat race, but you have to get along with less cheese,” Gene Perret, comic writer for such hit series as “All in the Family,” “Three’s Company,” and “The Carol Burnett Show,” famously quipped about retirement. Almost everyone longs for retirement, when they can finally get up whenever they like, take as many naps as they like, go on exotic vacations, play golf all day, and pontificate about the status of society.

It is, however, virtually entirely up to the individual worker to provide a secure retirement. Social Security and Medicare are designed to provide a floor under a retiree’s income and medical care expenditures, respectively, but are meant to be supplemented by other sources such as an employer’s contributions and personal savings.

Many retirees are disappointed to find that they cannot afford the comfortable lifestyle they had planned for in retirement because they did not save enough during their working years or made bad investment choices. And so they’re putting in extra hours at work, cutting back on their spending, and giving up some of their aspirations as a result. Unfortunately, though, hope is not lost even for individuals whose retirement hopes appear to have been crushed.

The Secrets to Getting the Retirement You’ve Always Wanted

Fewer than one in five employees are “extremely” certain that they can retire well, despite the tourism industry’s commercials depicting seniors strolling over the sand on exotic, foreign beaches or dancing the night away on a Caribbean cruise.

About a quarter of those who are now retired feel “extremely” certain that they will have sufficient funds to support themselves throughout their golden years.

Even if you’re worried about how your retirement will turn out, there are things you can do to make those years more enjoyable and secure financially.

  1. Increase Income Flow

Very few retirees maintain their pre-retirement earning levels. There are, however, ways to boost your earnings:

  • Income Support From the Social Security Administration. Your monthly Social Security income may change depending on whatever withdrawal option you choose. Never take a distribution before you reach the age of regular retirement (67 if you were born in or after 1960). By working over age 70, you can delay receiving your pension and increase its value by 8 percent every year. In addition, there are a variety of ways to maximize the spousal benefit, which may add tens of thousands of dollars to your retirement income if you’re married. Check out the SSA’s website and related pamphlets for more information on your withdrawal choices, both individually and jointly.
  • Benefits to Employees. To maximize your retirement income under a defined benefit plan, you should think about how long you intend to live. If you’re married, it’s important to consider how your partner will feel about this. Investing in a defined contribution plan, such as a 401(k), should take into account your age and risk tolerance. When you’re getting close to retiring, it’s important to take steps to protect your nest egg from market fluctuations and educate yourself on the tax implications of various withdrawal strategies. When you retire, the timing of your income is crucial if you want to reduce your tax liability.
  • Financial resources amassed by an individual. If you have several investment accounts, such as a savings account, a regular or Roth IRA, or other tax-deferred plan, you should treat them all as if they were part of the same portfolio. Make adjustments as needed so that your investing goals and risk tolerance are better met. Consider the impact of commissions and management fees on your returns if you invest in managed funds like mutual funds. Low-cost exchange-traded funds (ETFs) are increasingly being used by investors in place of managed funds since they may reduce portfolio fees by 1 percentage point or more.
  • Permanent or Permanently Renewable Life Insurance. Borrowing against the cash value of a paid-up or almost-paid-up whole life insurance policy allows the policyholder to invest the proceeds in a higher-yielding account. Having life insurance can provide your loved ones peace of mind in the event of your untimely demise.
  • When you reach retirement age, you should have finished paying off major expenses like a house and your children’s schooling. If you require insurance for estate liquidity, you may want to consider term insurance as an alternative to whole life.
  • Backwards Mortgage. The reverse mortgage is a financial product that allows homeowners 62 or older to access the equity they have built up in their property without having to make monthly mortgage payments. Rather than having to sell your property to access the equity you’ve built up, you may simply use this tool instead. Homeowners retain the legal right to reside in their properties for as long as they live, subject only to the continuing financial duty to pay property taxes, maintain active home insurance, and keep the house in good repair.
  1. Minimize Cash Outflow

Slimming down is a lifelong decision that will pay dividends. If you have extra cash flow when you’re young, you can put it toward a secure retirement. When you retire, every dollar counts, so it’s important to learn to budget carefully. When it comes to slimming down, there are two main factors:

  1. Invest Wisely. Make a distinction between what you need and what you desire. Think carefully about how a potential purchase can improve your safety, convenience, or contentment before making a final decision. Benefit from transportation, dining, and entertainment savings available to those of you of a certain age.

    Group tours, off-season trips, and home-swapping through services like Home Exchange are all great options for the avid traveler. Instead of buying a brand new car, save some money and drive a used one for at least a few years and 100,000 miles. You may save money by becoming a member of a food co-op or community supported agriculture (CSA), joining a hotel travel club to receive discounts on your hotel stays, or purchasing a season pass to a local attraction that you know you’ll visit more than once. As a last piece of advice, invest in memories rather than material goods. Rather of buying pricey trinkets that will just sit around and collect dust, you may get the same sentimental value out of looking at old photographs.
  2. Stay away from debt at all costs. Having debt means you have to pay interest for the privilege of borrowing, which may amount to 21% per year on credit cards, and the money you owe is a claim on your future earnings. You will be unable to put that money toward other needs while you are making payments on the debt. Because of the caps on raises that seniors typically face, their fixed incomes are also more susceptible to inflation, meaning that their purchasing power declines year over year. Being debt-free allows you to escape the stress that comes with borrowing money and gives you complete discretion over your income and where it goes.

A combination of increasing your income and decreasing your costs will leave you with more financial stability and peace of mind than either strategy taken alone.

  1. Have Fun

There is more to living than just the necessities of sustenance, shelter, and duty. Self-confidence, humor, social interaction, and doing things we like greatly contribute to our sense of well-being.

Retirement is the pinnacle of success; it signifies that you have conquered all obstacles and emerged victorious. You have earned the right to indulge your own desires, such as staying in bed an additional hour or skipping a dinner party with individuals you share little in common with. Consider this: if you had no one to satisfy except yourself, what actions would you take?

Laugh more and take yourself less seriously. It has been reported that a wise old cowboy once stated, “We all get to the barn sometime.” It’s just that some folks enjoy the journey more than others. Try to be less critical, especially of yourself. Be receptive to joy and humor. Do not sit around and hope happiness will come your way; instead, actively pursue it.

Many retirees must rely only on their Social Security check to get by, yet many nevertheless manage to enjoy life. If retiring abroad is a dream of yours, but you just don’t have the funds to do so, you may still get a taste of the culture by immersing yourself in literature, cinema, and lecture. If you have a taste for fine cuisine but lack the funds to frequent fine dining establishments, consider taking cooking classes and organizing a home dining club.

Spend money on a pet. Adopt a new pastime. Help others who are less fortunate than you. Get involved in your community to meet interesting people, exercise and stimulate your mind, extend your life expectancy, and increase your sense of purpose and accomplishment. The key to a happy retirement is not how much money you have, but how much you value yourself.

  1. Stay Healthy

Psychiatrist Dr. Robert Waldinger from MGH in Waltham, Massachusetts, says, “Exercise is the number one ticket item to assure a long, happy life.” It safeguards the cardiovascular system and wards against incapacitation in old age.

By maintaining a healthy diet and doing regular exercise, you can delay or prevent many of the negative effects of aging. Reduce your risk of cardiovascular disease by controlling your blood pressure, cholesterol, and weight. Cognitive decline is a frequent ailment of aging, but exercise can slow its progress.

You don’t have to be a gym rat who spends all their free time on the treadmill or doing weights. It has been proved via research that even just 10 minutes of walking three times a day is nearly as helpful as a vigorous 30-minute workout.

Dan Buettner, a National Geographic Fellow, a partner of the American Association of Retired Persons, and a “New York Times” bestselling author, made the assertion that the healthiest people on earth are shepherds in Sardinia, Italy, at a TED Talk back in 2009. Their technique? Hiking up and down hills for five kilometers a day. That’s almost 96 minutes to go a mile, which is a lot slower than the typical walker’s speed.

  1. Improve Family Bonds

George Santayana considered the family “one of nature’s masterpieces,” while Bishop Desmond Tutu said that they were “God’s gift to you, as you are to them.” The quality of your life and the enjoyment you experience are typically directly proportional to your family relationships.

Merrill Lynch Wealth Management and Age Wave observed in 2013 that on average, grandparents have five grandkids. The leisure time that comes with retirement is crucial to the level of enjoyment resulting from the connection, since “having fun together” (grandparent and grandchild) and “teaching and passing on family values” were identified as the top two markers of being excellent grandparents.

According to Joshua Coleman, co-chairman of the Council on Contemporary Families, alienation between parents and their adult children is a “hidden pandemic.” Family therapists, on the other hand, tend to feel that adult children may come around to forgiving their parents even in the most extreme situations of alienation (barring abuse). Modesty, tenacity, and the capacity to let go of resentment are essential qualities. Never give up on your child,” advises Susan Kuczmarski, an expert on family interactions at Northwestern University’s Kellogg School of Management. The following conversation has the potential to mend fences.

While close, supportive family ties are crucial to flourishing as an individual, seniors — especially those in precarious financial situations — should avoid taking on the role of family banker. Six in ten adults aged 50 and more, according to the same 2013 poll, offer some form of financial assistance to relatives. In many cases, help is given without any sort of repayment plan being made. Those with less than $250,000 in investable assets provide an average of $9,200 in total financial support to family members each year.

The cost of this assistance, while well-intentioned, may reduce the senior’s sense of financial stability and exacerbate tensions among the family. Further, one of the greatest anxieties of the elderly is being a financial or emotional burden on their loved ones. It’s a short-sighted (and usually futile) tactic to strengthen family ties by gifting goods or cash that will be required in the future.

  1. Accept Reality

The belief that everything will turn out okay in the end is one of the great untruths of existence. Each individual gets back in life exactly what they put into it.

Spendthrifts and gamblers who neglect to save for retirement are likely to face financial difficulties in old age. Compared to seniors who have made an effort to live healthily, those who have smoked, drank excessively, and been chronic couch potatoes are more likely to have health issues. Even if you’ve saved enough money to retire comfortably, being a selfish, self-centered, and intolerant person will almost certainly leave you lonely in your golden years.

The truth is that. However, it’s also true that it’s never too late to alter one’s behavior or make amends for past transgressions.

Bottom Line

The ability to do what you want, when you want, is a luxury few people enjoy, and Perret is right about that. The majority of us may wish we were all better at saving for retirement, but the reality is that we are not.

That doesn’t imply the vast majority of us will waste our twilight years fretting and worrying away, unable to take pleasure in anything. Analyze your situation from every angle, make changes where you can, accept the facts where you have none, and proceed. Abe Lincoln observed almost 150 years ago that “most people are as happy as they make up their minds to be.”

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