Being ‘money aware’ in retirement will pay off
Having recently released my blog “Why people spend on annual holidays rather than save for their retirement” I believe it would be great to expand further on the Retirement “awareness” with being “money aware” and how to sensibly plan for retirement. There was a time that when people retired, everyone was expected to go on a world trip or a grand cruise. After returning, they would then sell the neighbourhood home and move to a country like Spain. They would live out their later days at the beach, park or community centre playing card games, all the while spending their retirement funds on a new car, travel, clothing, and doling out money to all the relatives. It’s perhaps a nice dream for everyone involved, but for many people it is hardly anything close to being sustainable or indeed sensible. Yet so many people still try to ‘make it all happen’ in their first few years of retirement and then find out they have significantly reduced funds – often forcing them to go back to work.
Of course, I’m all in favour of having an active, full, enjoyable retirement – this is why we work and save hard during our working lives – so holidays and treating the grandchildren is, naturally, a good, positive part of retirement. But we also need to be careful not to blow a considerable part of our funds all within the first few years. The accumulated money needs to last, and everyone needs to know how to plan sensibly for retirement.
There are a few key reasons for this:
People are living longer
Thanks to the wonders of modern medicine, many people are living far longer than average age expectation. That said, this also means that people are living far longer than average retirement accounts can fund. 30 or 40 years ago, people generally lived about 10 years after retirement and passed away. So accounts didn’t have to be very big. Now individuals are living into their 90s, being kept functional and alive by better medicine, better treatment, and better nutrition. That means the money has to last longer too.
Inflation and cost of living keep increasing
There is no question that to buy the same food, utilities, and shelter 20 years from now will cost far more than it does today. For those expecting to live on a limited income in the future, this factor has to be taken into account. Inflation constantly eats away at buying power every year, and retirees feel it the most.
Don’t bet on government benefits
While senior benefits do still exist, they are weakening and losing value quickly. What used to be somewhat reasonable to live on in many areas isn’t enough to survive on today. This is even at a minimum wage level. In the next few decades, these benefits will likely shrink further, reducing their effectiveness for seniors.
The cost of healthcare is rising
With that march towards better technology in medicine, there’s a price tag. Insurance companies and healthcare providers are raising their prices to cover their operating costs and profit margins. That will contribute to more expenses for seniors in retirement, particularly in the area of pharmaceuticals and surgery.
Retirement funds should be a financial cushion; they should provide individuals with security and peace of mind for their entire retirement. Most major studies show that working with a professional, independent financial adviser to devise a tailor-made, long-term strategy is the best way to ensure financial freedom in retirement. Knowing how to plan sensibly for retirement will ensure you enjoy a great and balanced retirement.
Consulting with a financial adviser, in order to determine what you can afford and what potential risks there may be along the way will help you to enjoy a financially secure retirement to the fullest.
As an expat expert, I am on hand to help with all of the above and more.
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Mike Coady is an award-winning financial expert and a well-known leader in the financial industry.
Having taken two of his previous firms to Chartered Status in the UK and also achieved the prestigious National IFA of the Year Award – Highly Commended.
Mike is qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Fellow of the Institute of Sales Management (FISM), and a Fellow of the Institute of Directors (FIoD).
Blog published by Mike Coady