Retirement planning is one of the most important things you can do for you and your family. It is never too early - or too late - to start thinking about how you are going to accomplish your goals. Having a financial plan has actually been proven to decrease stress, just what retirement is all about!
The earlier you start saving for retirement, the more time your money has to grow. If you are already close to retirement age, don't worry - It is not too late to start saving. Even small amounts can add up over time, so it is never too late to start planning for your future. We recommend committing to save a certain amount every month or every paycheck, and setting it aside in a retirement or savings account that has the ability to earn interest over time. Set your savings goal to be manageable, you don’t want to make such a large amount of money that it is unattainable and you are easily discouraged. According to the 50/30/20 rule for organizing your finances, you should try to save 20% of your money each month. Check out this handy budget spreadsheet we made to help organize your money according to the 50/30/20 rule.
Plan how much you spend every month, how much you save every month and how much you intend to spend and save in the future. Nowadays, there are so many great apps and bank features that can help you visualize your spending and even budget for you, like Mooch!
A great deal of factors must be considered when it comes to retirement planning, but don't worry - we are here to guide you through them. In this article, we will cover some of the key concepts you will need to think about when planning for retirement: how much you will need to save and for how long, other sources of income, ideas including what to do in retirement and where to retire.
How much you will need to save:
How much you will need to save for retirement depends on a number of factors, including your lifestyle and where you plan to retire. A common rule of thumb is that you will need 70% of your pre-retirement income to maintain your standard of living in retirement. However, this is just a general guideline - you may need more or less depending on your individual circumstances.
The three most expensive costs of retirement are housing, transportation, and healthcare. According to Fidelity’s Retiree Health Care Cost Estimate, the average couple that retires at age 65 in 2022 needs to save around $315,000 in the bank just to cover healthcare expenses for two in retirement. This estimate is relative to where you live, how healthy you are, costs of healthcare in your area, and how you will cover costs.
When you are planning out your future expenses to calculate how much money you will need saved in order to retire comfortably, keep in mind that your expenses may not be exactly how they are now. Save enough money to be able to cover long-term medical expenses for yourself and your partner if you have one.
How to make sure you will have enough for when you retire:
1. Consider using a retirement calculator. This tool can help you estimate how much money you will need to save based on your current age, salary and other factors.
2. Invest in a retirement account. There are several different types of retirement accounts available, such as 401(k) s and IRAs. Talk to your financial advisor about which option is best for you.
3. Make a savings plan. Once you know how much income you will need in retirement, you can start putting away money each month to reach your goal. To start, use this savings calculator to experiment with different savings goals.
4. Stay disciplined with your savings. It can be tempting to spend your hard-earned money, but remember that you are saving for retirement. Try to avoid unnecessary impulse purchases and stick to your budget.
5. Get a financial planner. A financial planner can help you develop a retirement savings plan that's tailored to your unique situation. Financial planners will tailor savings plans to your unique situation.
6. Review your progress regularly. Checking in on your retirement savings periodically will help you stay on track and make adjustments as needed.
7. Have a budget, now and in the future! We know budgeting is really hard, especially later on in life when you may have more money to spend, but it is really important. Don’t view budgeting as a negative or restrictive thing, just view it as a plan for your money.
Another option to consider if you are not sure you are ready to retire completely is phased retirement. With phased retirement, you can continue working part-time after age 65 while also enjoying some of the benefits of retirement, like more free time and a reduced workload. This option can be a good way to transition into retirement if you are not ready to stop working entirely.
Additional sources to consider when planning:
Two programs that can help with retirement costs are Social Security and relatedly, Medicare. Here is a great explainer from the Social Security Administration on when to start receiving retirement benefits, as you can start getting your payments at any point between age 62 and age 70. Note that the later you start receiving social security, the higher your monthly payments will be.
If you are wondering about how Social Security relates to Medicare, they’re actually part of the Social Security package. Medicare is a health insurance benefit of Social Security for Americans age 65 or older. Medicare is great for helping to mitigate healthcare costs, but keep in mind that it will likely not cover all your costs and it will not cover most long-term costs. We recommend talking to a financial planner if you are considering if and when you may want to make use of these programs.
Halliday Financial's Christie Malmborg stated “It’s worth taking your time and considering all of the variables when it comes to making a decision about social security. Once you make a choice here, you generally aren’t able to change it later”.
At what age can I consider retiring?
There are a few different ways to retire, depending on your personal circumstances and preferences. The most common retirement options are retiring at age 65 (or your country's retirement age), retiring early (before age 65), or phased retirement (working part-time after age 65).
If you are thinking about retiring early, there are a few things you need to consider before making the decision. Early retirement can be a great option for some people, but it is not right for everyone. You will need to make sure you have enough money saved up to cover your expenses, and you should also consider how you will stay active and engaged during retirement.
Ideas to consider during Retirement:
● On the topic of staying active and engaged during retirement, you will want to think about activities or even roles that will keep you happy in your free time. Transitioning to not working can actually be stressful, as too much time on your hands may leave people feeling lost. To go from working your whole life to not working at all is undoubtedly an adjustment, so having hobbies, and activities, so staying engaged and occupied is key. Some of our favorite hobbies:
● Start a garden! Try growing some herbs, easy vegetables like tomatoes, or your favorite flowers.
● Try a new activity like tennis, biking or yoga and challenge yourself to do it a certain number of times per week. You don’t have to be Serena Williams, just have fun with it and stay active! Don’t want to bike outside or go to a yoga studio? No problem, with an indoor bike mount or your own yoga mat and a laptop you can watch free classes online on your own time!
● Learn to cook an interesting dish! Have you always wondered how to make a certain meal or dessert? Now’s the time to learn! We recently learned how to pickle vegetables (red onions are our favorite) and how to make fried corn on the cob!
● Volunteer! Now is the time to give back to your community, if that is something you value. Volunteering is a great way to give back to your community by getting more involved in the areas your community needs most. A bonus for you is that you will get to meet new people who also care about giving back. We love volunteering at our local women’s and healthcare centers, voting centers during elections, as well as the community food center and community garden.
Where should I consider retiring to:
Malmborg said “I often tell clients that retirement isn’t just an on/off switch for work. Most people haven’t retired before, so until they do, they won’t really know what their days look like, or what their spending habits will be – or if they will get bored and want to go back to work. Especially during the first year, it’s helpful to check in with their advisor periodically because there is a very good chance that we’ll need to make an adjustment here or there when it comes to income. Even after the first year, clients may find that we need to tweak their tax withholdings.”
One of the first things you need to think about when planning for retirement is where you want to retire. There are a lot of factors to consider when choosing a retirement location, including climate, cost of living, proximity to family and friends, and access to amenities.
It is important to do your research and visit potential retirement locations before making a decision. Retirement is a big change, and you want to be sure you are making the right choice for you.
Other factors to consider when estimating how much you will need to save for retirement include your expected retirement age, your desired lifestyle in retirement and any health care costs you may have.
Wondering where are the best places to retire in 2022?
Check out Forbes’ list of best U.S cities to retire to for a more thorough breakdown and the pros and cons of each city, but the following are some of their top suggested locations. This list takes into account everything from the weather, to average home cost, to activities and food options, to climate change and natural disaster risk, to number of doctors, to taxes. One interesting takeaway is that Forbes highly recommends many college towns for their opportunities for “lifelong learning and great cultural and dining options.”
- Athens, Georgia
- Charlotte, North Carolina
- College Station, Texas
- Columbia, Missouri
- Fargo, North Dakota
- Greenville, South Carolina
- Iowa City, Iowa
- Jacksonville, Florida
- Knoxville, Tennessee
- Lawrence, Kansas
- Lexington, Kentucky
- Lincoln, Nebraska
- Madison, Wisconsin
- Pittsburgh, Pennsylvania
- Roanoke, Virginia
- Rochester, Minnesota
- San Antonio, Texas
- Savannah, Georgia
- Sioux Falls, South Dakota
- Spokane, Washington
- Sun City, Arizona
- Tucson, Arizona
- The Villages, Florida
- Virginia Beach, Virginia
- Winston-Salem, North Carolina
On the international side of things, Travel and Leisure suggests these 10 countries as the best places to retire to: Panama, Portugal, the Dominican Republic, Spain, Costa Rica, Malta, Ecuador, Mexico and Colombia. These countries have benefits like significantly lower costs of living, lovely weather, affordable public and private healthcare offerings, and even special retirement visas, also called “pensionados.”
Making smart choices about where to retire:
1. Consider your climate preferences. Do you want to retire somewhere warm, or do you prefer a cooler climate?
2. Think about your desired lifestyle. Do you want to be close to family and friends, or would you prefer to live in a more remote location?
3. Consider the cost of living in your desired location. Retirement locations can vary widely in terms of cost of living, so be sure to do your research.
4. Evaluate your health care options. When choosing a retirement location, it is important to consider your health care needs and options.
5. Research the tax laws in your desired location. Taxes can have a big impact on your retirement income, so be sure to understand the tax laws in your chosen location.
How do I get started?
Kevin Jiang, Mooch co-founder had this to say on the importance of saving for retirement: “Our income and health will not be the same as we get older. Saving for retirement early doesn't necessarily mean you stop working, but rather gives you the flexibility to work less hours and have a nest egg in the case you are suddenly out of work or have to prioritize health over work.”
The sooner you start saving for retirement, the more time your money has to grow. Even if you can only save a small amount each month, it will add up over time.
Malmborg said “Clients need to be *mentally* prepared to retire. Being sick of your boss doesn’t make you ready to retire. When you go from working 40+ hours a week to none, you wind up with a lot of free time. Deep down we all know this, but I still see clients who were unprepared. For a lot of people, some of that time will be used for self-care and choosing not to rush (e.g. skipping the alarm, taking time to enjoy your coffee and the sunrise) but if you don’t know how you’re going to spend at least half of that time, you’re not ready to retire.”
The most important thing you can do to prepare for retirement is to chat with a financial advisor. Money Her Way partnered with Christie Malmborg to provide financial services to women that help people develop a retirement savings plan that is tailored to their unique needs. Every individual is different, which is why a financial planner can help you reach your retirement goals.
Retirement planning is an important but complex task. There are a lot of factors to consider, including where to retire, how to retire and how much money you will need to save. However, don't let the complexity of retirement planning discourage you - we are here to help.
Feeling overwhelmed and wondering how to get started saving for retirement? The best way to start is creating a budget for yourself now, so you can intentionally start saving for your future. It is never a good feeling to wonder where your whole paycheck went at the end of the month, and having a budget can really help you understand your burn rate and areas for improvement. Mooch also has lots of helpful (and free) spreadsheets available for downloading to help get you started on your budgeting journey, like this Budgeting Snapshot that tracks your financial wealth and measures how much you should be saving, how long it will take you to pay off debt, and your net worth.
Ideally, you should start saving for retirement as early as possible. The sooner you start, the more time your money has to grow.
With a little planning and a lot of discipline, you can ensure that you have enough money saved up for a comfortable retirement. Just remember to start early and stay the course - You will be glad you did!
If you take the time to do your research, talk to a financial planner, and plan carefully, you can make retirement a time to enjoy and look forward to. So, what are you waiting for? Start planning for your retirement today!
Halliday Financial Disclosure:
Securities-related transactions are managed by Halliday Financial's subsidiary, Halliday Financial, LLC., Member FINRA and SIPC. The Company only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by adviser), or product made reference to directly or indirectly via link to any unaffiliated third-party Website, will be profitable or equal to corresponding indicated performance levels. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. No client or prospective client should assume that any information presented and/or made available on this website serves as the receipt of, or a substitute for, personalized investment advice from the adviser or any other investment professional. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.
We co-wrote this blog post on retirement with Money Her Way, a financial blog founded by mother-daughter duo Rebecca & Rachel Pino, backed by their family owned financial firm: Halliday Financial.
Diversifying your portfolio with physical assets helps generate passive income and protects against inflation.