We’ve asked the question many times before: What do you plan to do in retirement? If the answer centers around your family (spending time with grandkids, your own children, your siblings, your parents), then this article is for you.
When putting together a comprehensive retirement plan, asking our clients how they plan to spend their retirement is step #1. Establishing what the long-term goal is, essentially lays the ground work for what we’re planning for. Are we planning for time at home or time traveling the world? Either way, plan now, retire happy!
If the answer to this question is “spend time with family,” we need to go deeper. While it’s a lofty goal, have you thought about how you will spend that time? Do you want to take your grandchildren on trips? Help your own children with babysitting? Visit your siblings out of state? Care for your parents? And more importantly, how will you fund those activities?
While it’s important to give a considerable amount of thought to how much money we’ll need in retirement to pay for living expenses like housing, food, healthcare, transportation and taxes, often times, we forget to factor in things like airfare and possibly lodging to visit children or grandchildren, or family trips we might like to take with them. You may know that you want to help your grandchildren financially, but have you factored in just college tuition and not camp costs, graduation gifts and even care for their children?
When planning for retirement, you need to start thinking about how you’ll spend Tuesday afternoons or Saturday mornings, and what the costs might be for those things.
The benefits of staying busy in retirement and spending time with family are significant and many. You’ll stay connected and emotionally engaged and can create lasting memories, not just for you but also your loved ones. You’ll have things to look forward to and avoid the potential loneliness and depression that can come with excessive amounts of idle time spent alone. According to studies, spending time with loved ones can even help delay the onset of age-related mental and physical decline.
To find out what expenses you’re likely to incur during retirement with regard to spending your time, ask yourself these questions:
How Will You Spend Time with Your Loved Ones in Retirement?
- Long-distance relationships: If your children and grandchildren live far away and you plan to visit them or pay for them to visit you, you’ll have to budget for things like transportation, food and lodging. You should also consider when and how often you would like to plan visits.
- Family trips: Perhaps you’d like to take the whole family on a cruise, to Disney World or rent a place and spend a summer at a lake house. Again, you should think about the long-term costs. Will this family trip be a one-time thing or an annual vacation? This kind of expense, while maybe not a frequent, recurring one, can be enormous and not one that you should take on without careful planning and budgeting.
- Discover a new passion: Maybe your plan is to explore a new hobby or interest that you might share with your children or grandchildren, like taking an art class together, volunteering for a charitable organization, hiking together or playing tennis. These can be great ways to bond with your family members that may not cost much, if anything at all.
Will You Help Your Children and Grandchildren Financially?
Studies show that many Americans provide significant gifts or financial help to their family members. About 25 percent of grandparents spend more than $1,000 a year on their grandchildren, often in the form of gifts and help with living expenses and saving for education. More than 50 percent of Americans between the ages of 50 and 64 offered some form of financial help to family members.
If you’ve managed your finances well and planned to be generous with your money, this might not have a significant impact, but many retirees haven’t considered these possible expenses when planning and saving for retirement. In fact, 88 percent of people over the age of 50 say they haven’t budgeted or prepared for providing this kind of financial support to other family members, even though they also say they would be highly likely to provide this kind of financial support if asked.
What Would You Like to Do in Retirement?
For many retirees, travel is a priority. If it’s something you’d like to do, think about the trips you really want to take, then prioritize them. Work out a travel budget and try to find ways to reduce expenses on your trips, like traveling during off-peak times or booking last-minute trips. Are you only planning to take significant trips during the earlier years of your retirement, when you have more energy and mobility?
Another common goal for retirement is leisure. Retirement can provide you with a lot of free time on your hands. But those museum memberships and theatre tickets can add up, especially if leisure was one line-item you left off your retirement budget. The average senior spends about $200 a month on leisure activities, which, over the course of the average length of retirement (18 years) adds up to $43,200.
One way to reduce leisure expenses is to seek out free or reduced-cost activities, such as community events and senior discounts for admission to things like amusement parks, movie theaters, museums and even national parks.
Can You Afford This?
The average senior spends about $46,000 a year during their retirement, so adding thousands of dollars a year in expenses you didn’t budget for to pay for things like travel, gift-giving and providing financial assistance to family can really make or break your annual budget or retirement savings.
If you’re still in your saving and accumulation years, think about your possible expenses in these categories of retirement spending, and find ways to save more or spend less to account for those expenses. A retirement planning worksheet like this one can be a very useful tool for this process.
If you’re very close to retirement or have already retired and haven’t factored these expenses in to your retirement planning, talk to a financial advisor as soon as possible to see what you can afford. You may be able make adjustments to your investments to allow you to do these things without running out of money during your lifetime. But like the saying goes: Plan now retire happy.
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