At this point in your life, you might be focusing on reaching a certain retirement goal. You want to save a certain amount of money, pay off debts, or reach a particular milestone in your career. But once you have retired, your thinking must shift from planning and saving to making your retirement savings last for the rest of your life.
Since the average life span is increasing, we all must make wise decisions about spending our retirement savings. The following four steps should get you on the right track.
1. Create a budget. It is likely that your retirement budget will be significantly different from your current one. You will analyze your expenses and designate a portion of your retirement income to regular bills. But keep in mind that circumstances can change, and your budget will change along with them. Keep some money set aside for emergencies. You might also find it helpful to begin living on your expected retirement budget one year prior to retiring, so that you can test drive your future lifestyle and make adjustments as needed.
2. Be smart about indulgences. It's a common practice to indulge in a generous retirement gift for yourself once you reach your goals. There's nothing wrong with this, but remember to plan for your splurge. When you discuss your retirement goals with your financial professional, tell him or her about this expense so that your budget will be able to accommodate it.
3. Plan carefully for health care. You may be enjoying good health now, and hopefully that lucky streak will continue for years to come. But keep in mind that it often is luck, and your situation can change drastically at any time. Consider purchasing long-term care insurance to cover expense of a nursing home. Remember, too, that your medical expenses will grow over time. Be prepared to adjust your budget accordingly.
4. Meet regularly with your financial advisor. No matter how confident you feel in your plans, you can't forget about retirement planning once you reach retirement! Continue to assess your goals and priorities, and make adjustments to your financial strategy in order to keep up with your changing life. Continue meeting with your financial professional on a regular basis so that your spending habits will reflect your changing financial ability and life expectancy.
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