Want to have retirement income for life? Planning for retirement involves breaking down lifestyle expenses and retirement income, then matching them to determine the odds that your savings and income support you for life.
To Have Retirement Income for Life, First Define Your Lifestyle
Surviving retirement financially is less about having money for things and more about having money for your lifestyle.
Retirees must first look at what their lifestyle is and define it, then look at lifestyle expenses, which can be broken down into two categories: essential ‘must-have’ expenses and discretionary expenses.Essential expenses make life worthwhile. They include food, shelter, and clothing, and taxes, etc. Discretionary expenses are things such as travel, entertainment, and hobbies and can be cut out if need be.
It’s understandably difficult for people to determine their total expenses in retirement given that they don’t know how long they might live. Retirees need to ask themselves this: What do I have to have and what do I want to have to get me through the next 20-30 years?
Consider Different Sources of Income
Major sources of retirement income are savings, and Social Security and income from assets such as 401(k)s, IRAs and more so recently, reverse mortgages. The goal is making sure that your needs are covered regardless of any risks. You’ll enjoy big advantages if your lifetime sources of income are sufficient to fund essential lifestyle expenses.
This goal can certainly be accomplished with a reverse mortgage (for instance) because you’ll get a steady income regardless of what happens in the market. Having this sort of income reduces the odds of outliving your assets and knowing that your essential expenses are covered will give you the stability you need to enjoy the life you have ahead of you.
Don’t Worry, Be Happy
For many who don’t hold a reverse mortgage there’s a gap between essential expenses and lifetime sources of income. This is a worrisome situation for some and a dire one for others.
Today, more and more financial advisors are discovering the usefulness of resources such as the reverse mortgage as a line of credit for their retired or soon-to-be retired clients. Reverse mortgages are a hedge against inflation that give borrowers future borrowing power, allowing them to live comfortably. This financial resource along with strategic financial planning is showing to be a lifesaver for many.