When planning for your retirement, it's important to set realistic savings goals. Imagine the lifestyle that you want to live in retirement and then work backwards to figure out what it will take to make that dream a reality. The big picture is usually easy to see, but sometimes the little stuff can slip through the cracks. Let's take a look at a few unexpected things you should plan for in retirement:
1. Inflation
When planning for retirement it's sometimes easy to forget to account for inflation. Especially since inflation has been pretty low lately. Over the past 20+ years, inflation has been low, and even below zero a few times. However, while it's impossible to predict the future, chances are good that inflation will continue to some degree going forward.
In order to reduce the chance that the cost of inflation creeps into your retirement funds, plan a little bit extra for your retirement fund. As a general rule of thumb, consider planning for 3% inflation each year when setting your savings goals.
2. Under-budgeting and overspending
When we retire, it's tempting to launch our new, carefree lives with a big bang. For most of us, traveling through Europe, purchasing that vacation home, buying a boat or luxury car all sound more enjoyable than living on a budget.
While it's great to spend some of that hard-earned money on the good life you've dreamed of, #TreatYoSelf, you don't want to leave yourself high and dry in later years. Think of your retirement as a marathon, not a race. Build a retirement savings plan that budgets your resources for the long haul, accounting for fluctuations along the way.
3. Wild cards happen
Those surprise bills will inevitably come up. Think about major home and car repairs—a roof leaks, a washing machine goes on the fritz, tires need replacing. Our prized electronic devices, too, have become essential to modern living. A broken cell phone, tablet, laptop or big screen TV isn't ideal.
Experts advise you don't dip into your retirement investments to pay for these surprise expenses. Instead, have savings on hand for emergencies, take advantage of same-as-cash credit deals, charge it and pay it off over several months or have a line of credit available.
4. Gifting can add up quickly
You've been smart with your finances, and now you're financially independent and living a comfortable retirement. From the outside, it may look like you have money to burn—or to loan to family and friends.
In reality, the “luxury" life you're living has been carefully planned and may not have included giving lots of your retirement funds away. Family emergencies, helping your children and grandchildren and other requests for money can quickly drain your resources.
Choosing to give is a personal decision, and you can take the time now to plan out how you will handle these requests if they arise.
Reach your retirement goals!
If you're ready to start planning for your retirement, Wright-Patt Credit Union (WPCU) can help make the whole process a little easier. The CFS* financial advisors and registered representatives on WPCU's Retirement Solutions Team, available through CFS*, are available by appointment to help you build a financial plan that works for you, your family and your future. Schedule a complimentary, no-obligation appointment today to learn more about your retirement planning options.