Retirement planning is often focused on investing for retirement. But saving during retirement is part of the big picture as well. Many soon-to-be retirees are finding they may be a little short on post-retirement funds. With yields low throughout the U.S., they may have to rely on savings strategies in their leisure years.
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To get a better handle on retirement planning in today's environment, we spoke with Sheila Handy, Ph.D., department chair and associate professor of business management at East Stroudsburg University. Professor Handy gave us some insight into retirement planning and how retirees can stretch their dollars.
Is it financially smart to set a retirement date when retirement planning?
Yes, individuals should set a specific retirement date. Rather than always thinking there will be more time to contribute to a retirement plan, setting a date allows you to estimate how much in Social Security benefits you will receive. You should carefully review your Social Security statement every year. It also allows you to know how many more years you can contribute to your employer retirement plan or (individual retirement account), and it provides a window for improving your current financial situation -- paying off your home mortgage and other debts.
What is the ideal amount needed to retire in 2012?
A rule of thumb used in retirement planning is that 70% of pre-retirement income is required to maintain the same lifestyle, since individuals spend less on taxes, commuting costs and likely expenses related to raising children. The same amount -- adjusted for inflation -- will likely be needed for 25 years (unless Social Security benefits are reduced). In either case, paying your mortgage and eliminating all credit card debt is beneficial.
For the person who wants to travel during retirement, what tips can you give him to live out his dreams of being a world traveler and financially stable?
Retirees can travel more affordably by planning trips during the off-season to take advantage of lower rates and airfares and by capitalizing on the flexibility in their schedules. (They can do this) by taking advantage of last-minute deals offered by airlines and travel sites. Staying in a condo and cooking your own meals may prove to be more affordable than staying in a hotel and eating out for one to two weeks. Some people trade houses with another retiree by using websites that connect individuals who are willing to exchange homes for one or two weeks. If travel is important, it should be built into the retirement budget. Other ways to travel more affordably include low-cost national park passes for seniors, 15% Amtrak discounts, Elderhostels and AARP discounts.
When pre-retirement expense planning, what are a few ways to reduce monthly costs and save more money for retirement?
Pre-retirement expense planning should include eliminating debt and cutting down on nonessential expenditures like eating out and buying coffee. Add any money not spent to savings. If you record every expenditure made in a two-week period, you would probably discover many ways to cut your current spending.
Is there an advantage to using a retirement planning coach?
A retirement coach can lend structure to your retirement planning. He or she can provide tools such as retirement calculators (estimators of funds available at retirement), investment advice and savings strategies. If you are not confident in your own ability to develop a retirement plan that you can follow, a coach can assist you in determining your retirement goals and then outline a plan to help you achieve those goals.
We would like to thank Sheila Handy, Ph.D, department chair and associate professor of business management at East Stroudsburg University, for her insight.