Retirement holds no guarantees these days with regard to consistent income. In our parents and grandparents generations, there were more givens to count on: most corporate pension plans were Defined Benefit Plans, providing a guaranteed monthly income for life. Social Security had a relatively constant cost of living raise, and the overall cost of living in general was much lower. Life was simpler, with less distractions and goodies pushed in our faces to tempt us. But alas, those days are gone, but the concept of retirement is still here- with a few more consequences. Mortality, the average lifespan, has doubled in the past 100 years. Add in how many more things we have in our life to spend on nowadays, and the dilemma of having enough principal and income to support us for as many as 30 years or more presents quite a complex puzzle to solve for lifetime support.
For those of the younger persuasion, the biggest hit to retirement savings is raising children. A middle-income family with a child born in 2013 can expect to spend about $245,340 for food, shelter and other expenses up to age 18, an increase of 1.8% from 2012 according to a statistic by the Agriculture Department. The same report cited housing at an average of $73,000 or 30% the cost of raising a child. Add to that an unknown but estimated cost of $150,000-$250,000 for an education, and it makes you wonder if the younger generation really has it easier or much harder than us 60 or so age old folks. For us, oftentimes the dilemma unfolds when we are struggling with the choice of helping our children at the risk of damaging our retirement savings and financial wellbeing. I've written before about how we teach our children to "just say no" but it seems we don't practice what we preach. I've seen many times parents who are consistently helping their kids by giving them monthly stipends, while they can’t make their own bills. It is a dilemma to ponder: there is no right or wrong in concept unless it impacts you so that you can't afford to pay your own bills, buy food and medication. Can you say no?
Another issue is the decision of when to retire: and if you are part of a couple, who will retire when? The timing of retirement impacts the timing of an impact of cash flow, and retirement may be right for one of the couple but not for the other. Compromises many be at hand as well as number crunching. Can you live with one income supplemented by retirement income and Social Security, or do you need both full time incomes? What will the retired spouse do when home alone while the other spouse is still working, and how will you reshuffle your together time to account for differences in time allotments. Increased vacation time, hobbies and new interests may be at hand but remember, hobbies cost money…did you figure them into the new reduced budget?
Would you consider relocating to a lesser expensive area? It's considerably lesser expensive to live once you move away from the tri-state area: life is slower and much more pleasant for most. For those who have children and especially grandchildren, this option seems to bring an automatic "NO." I have many friends who have sold their NY house, bought down South or West where the climate is much more ache and pain friendly and rented an apartment near the kids, with a combined cost of less than the NY residence. Let's face it- the cost of living in our area is outrageous... my opinion is we've got to be out of our minds to live here. It’s not going to get any better soon- most predict worse or just more expensive. Two residences for the price of one give will give you much more latitude to get away from bad weather, the kids (OK, admit it- sometimes you DO need a break). Golf 12 months a year. No more shoveling or slipping on your keister- I'm not telling you anything you haven't thought of already, but either don't want to consider or admit. Cleaning out the house of 40 years is a bear, but getting rid of all that old stuff is a blessing, and will save your kids the task of doing it for you.
Starting off fresh at this age with new furniture and everything new and clean is a wonderful thing... sometimes we just get caught up in the same rut for decades- maybe it's time to break the old mold and start a new adventure... with a lot less expenses and a lot more adventures. So, when working with your Certified Financial Planner® on your retirement planning, just trying to figure out how much you need in money is not the only issue consider: quality of life should be as if not more important. It could shed a whole new light on your retirement planning- not to mention making what you thought was impossible to be very possible indeed!
