There’s a lot of talk about saving up for retirement and how beneficial it would be to have a steady source of income during your post-work years. But for so many people, it’s hard to visualize life after retirement. What does it look like? What do people do with all that time? How do I save up enough to ensure I never run out of cash? And even if I do save up enough, how do I retain value during periods of rising inflation and economic instability?
Well, recently, some retirees shared their experiences of life after employment. These are people who saved up $2M or more, so they provide insight into what it feels like when you actually reach your retirement savings goals. We’ve extracted 5 lessons from their stories, and in this article, we highlight challenges you’re likely to face, mistakes to avoid, and general tips to make your retirement as enjoyable as possible.
1. Starting your savings early is key
This is perhaps the most important lesson you can learn from their experiences. Starting your retirement savings early gives you a headstart and increases your chances of putting together a sizable amount before you retire. Every one of the interviewed retirees started saving early, whether personally or employer-sponsored. There’s no such thing as being too young to start planning for retirement.
In fact, when you spread the savings over 30/40 years, that’s more years to compound your interest and boost your retirement account. For example, one of the retirees said it only took 6% of her yearly income (with employer matching) to reach $2M in savings. However, she did it over 37 years.
2. Keep track of your monthly payments
Tracking expenses is a habit that’s common among all the retirees interviewed, and with good reason. Even if you have saved up a good enough amount, you still can’t afford to spend wastefully. For one, no matter how small, the expenses start to add up over time. Secondly and most importantly, no one can say for sure how long they’ll live for after retirement.
Some of these people retired nearly 20 years ago and they’re still very healthy. If they spent lavishly at the beginning of their post-work years, they’d be feeling the heat now. In many of their stories, more than one retiree said they had to cut down how much they spent on groceries, eating out, and traveling just to stay on budget.
3. You need a sense of purpose during retirement
Aside from money management, another thing you’ll need to manage well during retirement is your time. From having your days filled with activity, you’ll now have weeks with nothing to do. One can quickly fall into a bad state as a result. So, the retirees suggest that everyone who stops working finds something to keep them occupied. This could be something you’re passionate about, a volunteer role, or a consultancy.
One of the retirees even took up a job that didn’t pay so well, but he didn’t mind. All he cared about was having something to look forward to when he wakes every day. Another took up a well-paying consulting role and yet another chose to coach kids’ sports.
4. Be wary of unpaid loans and mortgage payments
As much as possible, try to pay off all your debts before retirement. The last thing you want is to be paying off a credit card or mortgage from savings you earmarked for your post-work years. If you’re reading this as a middle-aged person, you still have enough time to put your financial affairs in order. And if you’re already approaching retirement, talk to a financial advisor about ways to cut down unpaid loans.
5. The financial market will always have good and bad cycles
Retirement savings are mostly invested into the stock market or related financial instruments. As a result, the ups and downs of the financial market will have an effect on your savings and how much interest accrues on it. However, the retirees said they learnt to live with the fluctuations; mostly because every bear market is often followed by an even more bullish one. And while they worry about the current crisis, they believe it’ll pass. With a solid investment strategy, you should be able to weather the worst of any financial crisis and make the most of the good years. The key here is balance, and a good retirement planning specialist can help you greatly in this regard.
In summary, the key to living well in retirement is starting early, keeping track of your expenses & cutting down excesses, and finding something to occupy your time and keep your mind sharp. Also, stay away from debt and position yourself to maximize the fluctuations of the financial markets.
If you have any pressing questions about your retirement planning and how to build a nest egg that will last through your post-work years, we have a specialist on hand to discuss with you. Just click on this link to book a quick consultation, and get professional answers to all your urgent retirement savings concerns.