Designing Your Retirement Lifestyle
You’ve been saving most of your life for retirement. “When can I retire?” is probably the most frequent question people ask as they get close to ending work. The most common way to start retirement planning is to focus on whether you have sufficient money to retire on – the “magic” number. Indeed, your financial advisor may be the one who is encouraging you to delay retirement and save more, even if you don’t really need to.
Future income is of course important. If you will only be relying on government benefits you are unlikely to be driving a Ferrari and taking annual world cruises. But, for most people, the amount you need depends on the lifestyle choices you make.
There is no magic number for everyone. Each person, or couple is unique.
How do I know if I have enough? Enough for what?
Smart employees start thinking about what they want to be doing once they retire about five or so years before stopping work. By this time, people have decided that they want to retire, but are not totally certain of the date yet. They are close enough to see how they stack up both financially and emotionally, yet far enough away that they can make any needed changes. It gives them enough time to consider all their options.
The Dream Stage
Retirement is not a one-time event. It’s an ongoing process that can last thirty years or more. It begins with focusing on what’s truly important to you and defining your hopes for the future.
A happy, fulfilling retirement means different things to different people. Have you actually thought about what your retirement life would be like?
You probably have some idea of how you’d like to spend your time. But for now, don’t focus on the budget. Focus on ideas.
Start listing all the things you want to do instead of having it all just jostling around somewhere in the back of your mind. What activities will you continue, and what new ones do you want to try?
If you’re a saver and enjoy watching the numbers add up and compound, you may have trouble with this. You don’t like to spend, even when you can afford to. But, wouldn’t you rather get a bit of fun out of that money rather than having it all go to someone else when you’re gone?
Even if you’re more of a spender, it’s a lot better to make your own decisions of what you truly want instead of being impulsive and constantly deflected by advertisers and salespeople telling you how to spend your money.
Practical things belong on your wish list too, like a new car or renovations to your house – those big expenditures that don’t come along often.
What will you do?
Travel is high on the list for many people.
- Cruise around the world.
- Tour all the interesting countries you see on the travel programs.
- Visit your homeland and reconnect with extended family.
- Buy an RV or motorcycle, and drive from one coast to the other.
My friend Gloria has travelled to New Zealand, China and Africa with her Seniors Club travel group and finally has the time to spend 6 weeks to 3 months to explore countries she’s interested in.
Others would rather stay close to home and spend more time with their spouse and family.
Pursuing hobbies is another common desire – golf, fishing, gardening, photography, and woodworking, to name a few. You can rekindle an old interest – or try something new.
Some people want to help worthy causes – volunteering in their community, or even far-off countries.
Where will you live?
We Canadians like to dream of living somewhere away from snow – or at least someplace warm for the winter. There are many ex-pats living in such countries as Mexico, Costa Rica, Ecuador, Italy and the Southern United States, either year-round or just in the winter months.
Many retirees purchase a smaller downtown condo to be closer to the arts and cultural events.
Some people expect to stay in their family home for as long as possible to be close to friends and good neighbours and pursue community activities.
Just because you’re married doesn’t mean you’re at the same place in your careers. Although you may be ready to focus on your flute playing, your spouse might still want to head to the office every day. Sometimes people aren’t quite ready to give up working yet for whatever reason.
But, at some point you will be retired together and before that time you need to have a serious discussion with your spouse. One RBC retirement poll discovered that nearly 70% of pre-retired Canadians aged 50 and older have yet to discuss their hopes for their post-career lives with their spouse or partner. When you are part of a couple, you have to incorporate someone else’s wishes into your life.
Make your wish lists separately. It can be too easy for one person to dominate the process if you try to do it together. You might even find out some things about each other that you didn’t know before.
Couples will quite often have a lot of the same things on their lists, but sometimes they have dramatically different ideas about what retirement will look like. You may want to buy a motor home and barrel across the country, whereas your spouse may want to spend more time with the grandkids, or volunteer for a favourite non-profit. Communication is key. You and your spouse need to be on the same page and there may have to be some compromises.
For decades you’ve spent most of your day apart. Spending 24/7 together can require some adjustments. So that you’re not continuously in each other’s pocket, find a balance between the amount of together time and time you spend apart pursuing individual interests.
Once you’ve decided on what you want to do, start doing your homework. An important part of this exercise is to determine what each wish will cost. Be specific. If a Mediterranean cruise is the first thing on your agenda, start researching cruise lines, look at prices and schedules, and so on. If you’d like to move to another province or country (either snowbirding or permanently), pull up all the information you can find. Also, investigate whether there are any tax or estate implications you need to be aware of.
You should get this research done well before your planned retirement date to find just the right options. If you find out something that changes your mind, you’ll have plenty of time to go back to the drawing board.
It’s wise to schedule the more strenuous activities for early on in your retirement. As you age, your energy level will likely drop, and health issues may appear that would make it more difficult for you to enjoy your activities.
Balance your goals into needs, wants and dreams. You can decide on your priorities once you see the costs stacked up against each other.
I always thought I wanted to live on an acreage with a small herd of alpacas, a couple of those funny smiling New Zealand pigs and a few chickens. This baffles my husband because we are both city born and bred with absolutely no experience with farm animals (plus I’m a little bit afraid of chickens).
While retirement is a great time to re-invent yourself you still need to be realistic. Most people don’t change their lifestyles very much. It’s a good idea to try the things you think you want to do ahead of time.
- Rent an RV for your next trip and see if it’s a good fit for you before you sell everything and hit the road.
- If you want to move abroad, visit at different times of the year and do some of the things you’d do if you lived there rather than just lounging on the beach with a fruity cocktail.
The bottom line
Now that you’ve collected your thoughts and analyzed your situation, don’t just sit there and hope for the best. Make your retirement plan.
Preparing for retirement is like getting ready for a trip. How many hours do you spend planning a two-week vacation? So, how much planning do you think should go into a 20 or 30-year retirement? It takes time to bring your dreams into focus. But the better the plan, the better the outcome. Establish a preliminary plan, set some goals and consider multiple scenarios. Try to envision yourself retired.
It’s wiser to make your own decisions than to let time make decisions for you.
What are your retirement plans?