August 31, 2012
In a previous article, I shared my personal insights and opinions on how to invest carefully. By doing this, we can build a retirement savings portfolio that will support our retirement lifestyle. But this is only one key for success.
Another important key for success is to spend wisely during our retirement years!
When it comes to spending, I remember my father telling me in no uncertain terms that I had champagne taste but only beer income. At the time, I have to admit that he was right! Now during retirement, I think we should turn this around. By spending wisely during retirement, maybe we can say that we have “champagne check books” and “beer expenses.”
The main point is to be conservative in your spending and in your lifestyle.
I expect that most retirees are cautious about drawing down assets when there is so much uncertainty about the economy. Another concern facing many retirees today is the rising cost of health care. This can account for 14% to 22% of your annual retirement budget. What can a retiree do in the face of so much uncertainty?
One solution may be to develop a detailed retirement plan that includes a retirement budget and a draw down strategy to meet your expenses and taxes every year throughout your retirement. If you then spend wisely and cut back on optional expenses, or if you save a little more during the year (maybe just one vacation instead of two), you may end up with some disposable income every year.
By spending wisely, and possibly having some money left over every year, you may want to think about buying long-term care insurance as a way to combat the rising cost of health care.
In closing, I realize that my insights may be easier said than done. So if you have some thoughts on how to spend wisely, please post your comments and share your ideas on this important retirement issue for all retirees!