Even if you’re eagerly counting down the days, easing into your next stage of life as a retiree may take some time. You’ll be adjusting to a new daily pace, fewer demands and possibly even a new place to call home. Although the changes may be welcome, for many older adults, retirement can also be a source of stress, especially if you’re worried about the financial implications of your new lifestyle.
Ensuring you’re ready to embrace a comfortable retirement lifestyle begins by understanding the importance of financial planning for seniors. A thoughtful, well-structured budget that accommodates the retirement lifestyle you envision will allow you to make a more seamless transition.
A solid retirement financial plan requires defining your vision for the ideal retirement lifestyle, assessing the options to help you attain those goals, and putting plans in place that align with your vision and budget.
Envision Your Ideal Retirement
Determining a budget for your retirement begins with figuring out exactly what you’re going to be paying for. Start outlining your vision by asking yourself questions such as:
- How will your current home fit your needs as you age?
- Do you want to remain in your current city, or does a different location or climate appeal to you?
- Does a modest or luxury lifestyle suit you best? Or something in between?
- Will you spend more of your time at home or traveling?
- Are you hoping to spend more time with children, grandchildren and friends?
- What kinds of hobbies and activities do you look forward to exploring?
- What is on your “I always want to…” list?
- How will you manage your physical and mental wellness as you age?
- Do you have any health or medical concerns that may affect your retirement plans?
Understand the Importance of Timing
Time is a critical factor in financial planning for seniors. The sooner you start planning, the more options you have available.
Saving Duration: The earlier you begin saving and planning, the more flexibility you’ll have. It’s never too late to start saving for retirement, but you’ll benefit from working with a financial advisor to maximize your retirement contributions if you’re getting started later in life. Paying into a retirement account for a longer period of time obviously increases the base amount, but it also gives your investments time to mature and allows interest to accumulate.
Your Retirement Age: When you plan to retire also significantly affects your retirement budget. The earlier you retire, the more years you’ll need to budget for living expenses. While no one can predict the future, know that the average life expectancy in the United States is 77, but thanks to advancements in medicine and technology, people are living longer. In fact, many experts offering retirement budget tips recommend planning for a 30-year retirement.
Identify Sources of Income
Retirement income looks different for everyone and depends on numerous factors, including lifetime earnings, retirement planning tools and other assets. Some of these include:
- Private funds (your traditional saving, retirement and investment accounts)
- Fixed income (Social Security, pensions, annuities)
- Real estate assets/equity (the money that remains after you sell and pay off any remaining loan balances)
- Life insurance (some policies allow you to convert the cash value rather than waiting for the payout as a death benefit)
- Long-term care insurance (benefits are typically reserved for supportive services, so wouldn’t be available for general retirement expenses or independent living)
- Other benefits, such as programs for veterans
- Part-time work, which some seniors use to fill financial gaps, while others enjoy staying busy
Map Out Your Ongoing Expenses
Detailed financial planning for seniors involves taking stock of how you’ll pay your bills, but it also requires taking a close look at what those expenses will entail.
You may begin saving for retirement well before you begin thinking about the specific details of your month-to-month expenses, and that makes plenty of sense. Inflation and many other variables make it difficult to know exactly what you’ll need to cover your bills when you reach retirement age.
However, as you approach retirement, you can start to make more concrete plans based on real numbers (or at least good estimates). Your budget should account for all of the necessities, as well as the non-essentials that allow you to achieve the retirement lifestyle you envision.
You may find it easier to account for all of your expenses by breaking them into categories:
Household
- Mortgage/rent
- Property or renter’s insurance
- Property taxes
- Utilities (gas, electricity, water, etc.)
- Food
- Clothing
- Personal care/grooming
- Maintenance/repairs
- Cleaning supplies
- Phone (cell, land line or both)
- Internet
- TV (streaming services, subscriptions, cable)
Transportation
- Vehicle
- Insurance
- Property taxes
- Registration
- Gasoline
- Maintenance
Health
- Insurance
- Office visits (co-pays)
- Prescriptions
- Pharmacy/over-the-counter medications
- Dental care
- Vision care
- Other specialists (e.g., chiropractor, physical therapist, etc.)
- Wellness programs (e.g., gym membership, fitness classes)
Lifestyle
- Travel
- Eating out
- Lifelong learning
- Hobbies
- Other entertainment
- Holidays/gifts
- Pets
- Charitable giving
Also remember that retirement expenses will likely change over time, especially if your health changes. Smart financial planning for seniors should also reflect the possibility of eventually needing support with daily activities, or more intensive nursing care for an illness or progressing medical condition.
An Option That Offers More Predictability
If you’ve reached this point and you’re thinking to yourself that there are just too many unpredictable variables to create (or manage!) a realistic budget, you’re not alone. It is a big job, and it’s a reason many seniors choose to move into a life plan community in retirement.
As a resident of a community like Canterbury Court, you get immediate access to all of the community’s resources, including a range of amenities and services that fold into your financial plan rather than accumulating as a series of line items. For example, in addition to its signature Legacy Gardens, residents can also take advantage of a woodworking shop, arts and crafts studio, business center, billiards room, theater, wellness center, in-house clinic, exercise areas, and indoor heated swimming pool and whirlpool. What’s more, you also get the peace of mind of priority access to future care if you need it.
A life plan community isn’t just about access; it’s also a smart financial choice that gives you predictable monthly expenses. The life plan community costs include an entrance fee that you pay to enter the community’s independent living neighborhood, and then each month, you pay a monthly fee that covers a large share of your living expenses (your residence, maintenance, utilities, etc., along with security, housekeeping, meals and amenities). If you need additional care in the future, you can count on preferred rates determined by your contract.
Put Your Plans in Motion
With retirement on the horizon, you can start putting together the pieces to achieve the lifestyle you envision. Knowing how you want to live and what resources you bring to the table will empower you to make decisions about where you want to live.
Once you begin researching options, especially if you decide to explore the senior living communities in your area, you’ll be able to take advantage of resources to help you see how the community aligns with your vision. Some communities even offer affordability calculators online so you can do your homework before you even schedule a tour.