When people start planning for retirement, the first thing they need to think about is their goals. Unfortunately, a lot of people don’t have clear goals for their retirement. Retirement goals are important because they allow you and your financial advisor to define what is important to you and to prioritize these objectives. You can then and create a plan that works toward those goals. A clear, well-defined set of goals will not only help you plan for your future, but give you a better idea of what you want from that future as well.
Lifestyles of the Rich and Retired
You’ve probably heard plenty about how lifestyle choices can affect when you retire—and how you retire too. How you plan to live your life during retirement obviously affects your financial planning. After all, if you plan to travel the world and keep your house, you’re going to need more money than someone who decides to downsize their house and keep working part-time once they’ve reached retirement age. Even though there’s immense diversity in what people want to achieve in retirement, more often than not, from a financial perspective, people’s retirement goals fall under 1 of 4 categories. Before you do anything more, think about these 4 goals, and figure out which one best describes what you want to do in retirement.
4. Avoid Running out of Money
Plenty of studies have shown that retirees run a risk of falling into dire financial straits and living at a lower standard of life than people at other stages of life. Running out of money during retirement is a huge source of anxiety for retirees and those thinking about retiring—and given the statistics, it’s a legitimate fear for many people. Many don’t like the thought of needing to rely on their children for financial support or being forced to return to work. Good retirement planning can help you avoid this situation.
3. Maintain or Improve Your Lifestyle
Given the fears people have about running out of money during retirement, it makes sense that another major concern for would-be retirees is maintaining their lifestyle. Many people don’t envision themselves selling their houses or moving to a new neighborhood. In fact, some people even aim to improve their lifestyles, perhaps by moving out to the country or engaging in hobbies such as sport or travel. The key here is maintaining your purchasing power and growing your income—goals a good financial advisor can help you achieve.
2. Increase Your Wealth
While many people will be content simply keeping enough in the bank to maintain their independence and their lifestyles during retirement, others will want to take a more growth-oriented approach to their retirement planning. Once people have managed to secure their own futures, their thoughts usually turn to their legacies: the inheritances they will leave to children, grandchildren, or other relatives, and the gifts and donations they might leave to institutions such as schools, charities, or other organizations. Increasing wealth as a goal in retirement not only supports legacy planning, though; it can also help you achieve a better standard of living during retirement.
1. Spend Everything
Most people take a conservative approach to retirement; they’re preoccupied with worries about the future—whether they’ll have enough money, if they’ll be able to maintain the same standard of living, and if they’ll have anything to leave their heirs. Some people, however, may choose a radically different approach: spend it all. Although they may have spent their lives working hard and saving for retirement, they want to spend every dime on themselves—they’ve earned it, after all. This is often a risky goal to pursue, since most people don’t know exactly how long their retirement is going to be. People with this retirement goal may find that they run out of money too soon.