Retirement savings are frequently considered in terms of dollars and cents: How much money can you save before you hit age 65? But what if you flipped that idea on its head and focused on how you want to live?
Doing so will allow you to answer one of the most important questions about retirement, one that so many people overlook: What kind of lifestyle do you want to have in retirement?
Will you focus on travel, move to a community in Florida, or downsize to an apartment in the city? What will you spend more money on than when you were working, and what will you spend less on? Here, we’ll look at the benefits of considering your retirement lifestyle and show you how to build a budget and save smarter to meet your goals.
Why Focus on Spending?
Thinking about spending rather than saving bucks the conventional wisdom. So you might be wondering, “Why think about retirement this way?”
It all comes down to happiness. Studies show that if you can stay active in retirement, you’ll be happier. And being active and happy doesn’t always mean spending money. Activities like socializing, walking or exercising, working part time and volunteering have been shown to bring happiness across a range of retiree age groups.
Happiness means different things to different people. To some, it might mean golfing or learning a new hobby, and to others it might mean adopting a pet or auditing a college class. Generally speaking, it means doing what you love, surrounded by the people you love.
What does that look like for you?
Think About the Life You Want
TV commercials about retirees love to show scenes like retirees on a yacht in an exotic destination. While doing exactly that might actually make you happy, it’s not the life everyone wants. Find your own bliss in retirement by considering these options:
● Second career or part-time work. Were you reluctant to retire from a career you loved? If so, you might want to think about what role work will play in your retirement lifestyle. Follow a passion you’ve always wanted to pursue like teaching piano or baking bread. Or you might consider working part time to stay active and contribute to your savings.
● Volunteer. Helping others is immensely satisfying and doesn’t cost a thing. If you want to stay involved in your community and support causes important to you, consider volunteering your time and efforts. There’s a volunteering option for everyone, whether it’s pitching in at your church or helping the needy at a community center.
● Travel. There’s a reason so many recent retirees head straight to the beach: You worked hard, and retirement is a time to enjoy the fruits of your labor. Travel doesn’t have to involve expensive jet setting in tropical locations. Save money and do good through international volunteering. Pet sit for a friend in another city. Buy a used RV and camp across the National Park System. Travel in the off-season and take advantage of senior discounts. In other words, you can enjoy the experience of travel without the high costs.
● Take classes. No matter how old or young we are, it’s always exciting to learn new skills and ideas. Have you always wanted to learn to paint or make a perfect chocolate soufflé? Take an art or cooking class. Want to brush up on your Spanish or learn some German for your next vacation? See what classes your local community college offers seniors. Or take a few free classes at Yale or Harvard.
● Focus on home life. You might not need to leave home to live an enriching life. Gardening, reading, and visiting with friends and grandchildren may offer all the variety you need.
Where Do You Want to Live?
One of the biggest factors in your postretirement lifestyle is determining where you want to live. Start by thinking geographically. Do you want to prioritize an active, outdoorsy lifestyle? If so, you might want to be close to the mountains, parks or a beach. Do you want to be close to cultural amenities? Then living in a city might be your choice.
You’ll also want to think about the people you want to be close to. If you plan on spending lots of time with your children and grandkids, you might want to move closer to them. Perhaps you want to spend your time close to other retirees, and in that case, you might want to live in a retirement community.
Next, think about the type of home you’ll want. If you’ve already paid off your home and you love your neighborhood, staying put might be appealing. But if you still have a mortgage and want to cut your expenses, you might consider downsizing and moving to a smaller apartment or condo.
So How Much Will You Need?
After you decide which postretirement lifestyle is right for you, it’s time to turn to the question of financing it. Consider your basic and discretionary needs, and remember that as you continue your path through retirement, you’ll likely be spending less on activities and more on healthcare.
One rule of thumb experts recommend is to plan spending around 80% of your preretirement annual income during each year of retirement. But depending on your lifestyle, you might be able to get by on 70%.
Remember that planning your retirement income can be tricky, and there are many calculations you should keep in mind. You don’t want to draw down your savings so quickly that you have nothing to live on in the decades after retirement. But you also don’t want to spend so slowly that you’re not enjoying life. Focusing on what makes you happiest is one way to find that balance, and working with a trusted financial advisor is the way to make your postretirement dreams a reality.
William Myers is a financial writer based in Dallas.
READ MORE: 5 Awesome Places to Retire on $1,500 a Month or Less