For the uninitiated, the goal line for retirement is situated long away in the future. To them, retirement means a comfort zone with no bosses, and multiple yeats of fulfillment, prosperity and comfort. In reality, however, retirement cannot be described as a steady state. Retirees in all probability will endure a number of stages, with their own preparation.
According to Scott Hanson, who co-founded Hanson McClain Advisors, the problem begins from the fact that a majority of financial planning programs approach retirement as a constant season. In actuality, early retirees can be healthy and active. They will spend more on travel and activities compared to their later years. A study done by Bank of America Merrill Lynch showed that the demographic of retired baby boomers spend more amounts of money on travel as compared to other age groups. Only later do retirees slow down, but remaining quite healthy. The last stage is of a frail body one, with considerable healthcare expenses and being helped with ordinary acitivities like cooking, dressing and cleaning.
In the opinion of Charlotte A. Dougherty of Dougherty & Associates based in Cinccinati, most people miscalculate current cash flow. It thus follows that estimates related to retirement expenses tend to become lower than the actual amount required.
It is extremely important to follow a budget and not spend all cash which comes in from the investment accounts. The following should be considered:
College and retirement: Any pre-retiree must be cautious when it comes to taking money from the retirement acconts to fund the college education of their children. The hard truth is that many young people have the advantage of a number of years to pay off the college loans. The parents, on the other hand, have much lesser time if they want to rebuild the same retirement accounts. Experts have put forward the view that any money taken out from such retirement accounts should be regarded as a loan and not as a withdrawal.
Continuing the saving habit: Any person above 40 years of age should save approximately 15 percent of their gross income to make an adequately large nest egg. This will generate a retirement income which is 75 percent of the pre-retirement earnings. If a person is above 50, they should embark on a clear planning schedule and boost their savings via “catch-up” contributions to retirement schemes.
Retirees should continue to stay in the stock market just after retirement so that the sum could grow unhindered. Every retirement plan must include stocks.