One of the most important aspects of a financial plan is your retirement budget. Over the course of retirement, your budget will fluctuate due to various lifestyle goals and other unforeseen occurrences.
To establish a realistic budget the best way, we start by analyzing your current spending. Understanding where you spend money will help you and your advisor identify the things most important to you.
One of the biggest misconceptions is that you will spend less in retirement, but this is rarely the case. Even though your house may be paid off and your children may be finished with their education, grown-up, and married, you become accustomed to a particular lifestyle. Below are a few items you need to think about:
What costs are associated with updating and remodeling your current home in preparation for retirement? Also, what will those costs approximate with new furniture purchases?
Would you like a place to escape Houston’s hot summers or a place for a family gathering spot?
When you retire, you will have more time to vacation. Planning a larger travel budget when you first retire is realistic, especially if the travel budget includes family members other than you and your spouse. From time to time, retirees invite their children and spouses, grandchildren, parents, and in-laws along on vacation.
Inevitably, you will need to assist elderly parents or other family members during critical years. This could include incurring costs for proper medical care or assisted living costs, as well as travel costs to their hometown to assist them in day-to-day activities like paying bills or taking care of a home.
Automobiles will likely need to be replaced in retirement. Often times, I hear clients preparing to retire say that they just paid off their cars and they believe they’re in good shape. But, the reality is there are always costs that creep up for automobile repairs, maintenance, and eventually replacement.
Many retirees will plan on helping grandchildren with education costs such as private schooling and/or college.
No matter what stage of life you may find yourself in, planning for retirement requires a realistic understanding of where and how you spend your money, as well as planning ahead for life’s unanticipated expenses.
Willis Johnson, CFP®
President and CEO
At Willis Johnson & Associates, we take the time to understand you by combining employee benefits expertise and financial planning wisdom with the emotional elements of your life.