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Steps To Take Now to Plan Your Retirement
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By Stan Spector
There are a number of things you should be thinking about doing to plan your retirement before you get there. These become the basis for your retirement plan. Here are some to consider.
Decide what you will be doing in your retirement years
• You may decide to get involved in a volunteer organization. Try working a week or so with your target organization during a vacation. You will really try it on for size and see if that will really be enjoyable to do work week after week. It will also allow you to check out the organization to see if they look as good on the inside as they do on the outside.
• You may decide to find a part time job that has nothing to do with your current career. Take a look at these jobs closely and see if they will really satisfy your working desires.
• You may decide to start your own part-time or seasonal business. Getting a head start on certain of these businesses will allow you to see if you will really enjoy doing all aspects of the business instead of just the part of the glamour that attracts you. Too many of the hobby businesses end up requiring the owner spend most of the time on sales and little of the time on the hobby.
• If you plan on joining a retirement community or take up a retirement sport, try doing that day after day. If you like a certain retirement community with a lot of organized activities, go there for a 2-week vacation and see if that really is for you.
Once you know how you will spend many of your retirement hours, decide where you will do this. Decide if you will move to another part of the country or stay in the area you currently live. If you are moving, go there on vacations and make sure you will really be happy living there. If you plan on moving far south or southwest, make sure you like the climate even in the summer and not just the winter. If you spend a lot of time in a community, you will get a good chance to see various living areas, the true cost of living there and the availability of the activities that you would like to do. While you may think it hard to uproot yourself now and make new friends and finding new doctors, it will only become harder as you get older.
But don’t necessarily jump into buying something if you are thinking about a community with a high percentage of retirees. If a new community is built that caters to retirees, they may sell all the units out in a few years to people who are in their active mid-60’s and have recently retired. If you buy in before you are of that age, i.e. 55, you may find that when you retire at 65 the now mid-70’s community no longer is active enough for your needs. If you are moving to a community of all ages, you might find it advantageous to buy early if the prices are really down and rent the house out for 10 years or so to pay off most of the mortgage before you retire and move down there. Even if you decide to stay in your own city, you might find another end of town is more conducive to the activities you will be doing during retirement. We are seeing a lot of retirees moving from the far out suburbs back to the city centers where they have easy access to all the free activities there.
And don’t forget to look for the communities that have low taxes and even look for communities that will freeze your real estate tax rates once you become a senior. Make sure that a new house will have high efficiency mechanical equipment to reduce the effect of the expected utility bill increases. High efficiency air conditioners lose their efficiency and it may be worthwhile having new heating and cooling equipment on your retirement day. Same idea goes for your water heating (solar may be the best for you) and your refrigerator. Solar water heating may not offer gigantic savings over the year when you consider the cost of the equipment but it does turn a portion of your utility bill into a fixed upfront expense and not a variable cost that continues to become more expensive each year.
Think about that retirement house. Design it in your mind. Remember the trends of increasing real estate taxes and consider how the tax assessments are determined. Design your house to minimize the tax assessment. Cut out that second story and don’t consider the basement as anything except as storage area since it really is a second story of the house that you will find increasingly harder to use as you become older.
Keep visiting the perfect area for your retirement and looking for the perfect house and community there to live in. Sometimes the right opportunity will come along and it will be time to take the plunge.
Go over your finances and put together a retirement budget. Try to remove as much of your living costs by up-front expenditures. Buy a house that you pay in cash or pay off before retirement would remove a lot of uncertainty in your budget. Buying the car(s) that you will use and pay cash for them just before retirement will help defray some monthly costs from your budget for a number of years.
Put together a budget of must-do expenses and try to fix any of the costs that you can. One thing that I have mentioned before is moving to a community that fixes senior’s real estate taxes. Put the housing costs, day-to-day transportation costs and cooking at home food costs in this mental bin. Consider that if any of these costs rise faster than your monthly income, you will move money from your discretionary bin to this must-do bin.
Put together the listing of all the money you would like to regularly spend during retirement. Things like travel and vacations, eating out, recreational activities and splurge buying belong in this discretionary bin. Commit that when you get to retirement, you will keep enough money in the must-do bin to cover cost increases and not tap deeper into this discretionary bin than your current income will allow.
So if the stock market has a bad year and your savings go down, your must-do bin may take up most of your free income. You’ll have to cut back on the comfort items. Be prepared to hunker down to the level you can afford to live and not spend future year’s needed money.
There are a number of considerations to plan your retirement. A little thinking beforehand can save a lot of heart ache and money later on.
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