Throughout 2015 I’ve had the pleasure of sharing with GOBankingRates.com readers the tips, tricks and advice for enjoying a happier and earlier retirement. I compiled these tips while writing my book, “How to Retire the Cheapskate Way.” As we end the year, here’s a recap of some of the more important points:
1. How much money will I need to retire comfortably?
That’s the $64,000 question. And while the answer depends on a lot of individual variables, in most cases it’s likely to be a lot more than $64,000.
Beware, too, that most financial planners use one-size-fits-all retirement planning models that fail to adequately take into consideration the dramatically different spending habits of would-be retirees. This weakness in planning models — coupled with the fact that many financial advisers have a vested interest (aka “commissions”) in selling you certain investment products — can lead some people to think they need a lot more in retirement savings than they probably do.
Become your own CFO (“Cheap Frugal Officer”) and really crunch the numbers of the spending side of your retirement budget to get a more realistic idea of the size of the retirement nest egg you’ll need.
2. Is it realistic to think that I’ll spend less once I retire?
The odds are that your spending will drop as you age throughout retirement, at least according to the annual Consumer Expenditure Survey compiled by the U.S. Census Bureau. With the exception of spending on health care, the survey shows that average spending in virtually every other expenses category — transportation, entertainment, housing, food, etc. — drops significantly in retirement, particularly for those age 65 and older.
While your spending isn’t guaranteed to drop, the data are compelling for retirees as a whole and is worth considering as you develop your retirement lifestyle budget. Keep in mind, however, that many people report an increase in spending (particularly for things like travel and entertainment) in the early years of retirement.
3. At what age should I begin drawing Social Security?
In order to know the best answer to that question, you’d need to be able to foretell the future and, specifically, how long you’ll live. And while you have your crystal ball out, you might also need to predict how long your spouse and any other potential recipients of your Social Security benefits will live as well. That said, there are built in financial incentives that encourage people to postpone drawing Social Security benefits.