Key takeaways
- Embrace empathy for your future self.
- Be sure to budget for health care needs.
- Hobbies, travel, more work? Consider what you'll do in retirement.
A common bit of retirement advice is to visualize your “future self”: If you can picture how you’ll look (and how you’ll live) after you retire, you can empathize with—and make spending and saving decisions that will benefit—that version of you. But for most of us, it's difficult to imagine where we’ll be a year from now, never mind decades down the road.
Here’s how to imagine your future self and craft the right retirement strategy for you.
Focus on housing
Housing is often the biggest line item on anyone’s budget, so it’s a key retirement consideration. The decisions you make will go a long way toward informing your overall lifestyle. So, ask yourself these questions:
- Do I intend to “age in place” by staying in the same home and community I’ve been in for years? That’s the plan for 77% of Americans over age 50.1
- What sort of home modifications might I need as I age and potentially lose some mobility?
- Will I move in with relatives or go to a retirement community? What about the possibility I may need assisted living?
- Will I want to downsize to a smaller place to save money, or even retire overseas?
Clearly, there’s a lot to think about. Sitting down and making a list of potential wants, needs, and pros and cons could help you to keep it all straight. It’s also important to discuss all options with your spouse or partner and other family members to avoid surprises or mismatched expectations.
Health care needs
Medicare covers some—but not all—medical expenses for Americans over age 65. A healthy 65-year-old couple retiring today could face $387,644 in lifetime health insurance premiums, deductibles, copays, dental costs, and other expenses. And that’s before inflation.2
Moreover, those numbers don’t include the potential cost of long-term care needs like custodial nursing-home care or at-home assistance with eating, bathing, or dressing if you’re no longer able to do those things for yourself. Given these realities, it’s important to factor in potential health care costs as you plan. If you already have a chronic ailment, or a condition such as heart disease runs in your family, you’ll likely want to allocate even more money for potential medical needs.
Also understand that your health care spending may peak in your final years, as the need for doctor’s visits, in-home nursing care or hospital stays intensifies. And consider purchasing long-term care insurance, which can help with costs for services Medicare is unlikely to cover—and is generally cheaper the earlier you buy. Without coverage, long-term care costs can be quite substantial.
How you’ll spend your time
Many people plan for the logistics of retirement but overlook the matter of how they’ll fill their days. However, retirees who plan for and participate in a variety of activities—whether volunteering, traveling, or engaging in a hobby—tend to be happier and healthier than those who don’t.
Increasingly, older Americans are embarking on encore careers, where they pursue outside work or launch their own businesses. This work may not bring in as much money as a former corporate job, but it can provide a sense of fulfillment along with some income to supplement Social Security and withdrawals from retirement savings.
What you can do next
Getting an early look at yourself in your later years could give you the planning nudge you need. If your workplace retirement plan offers it, an auto-increase feature can be a (relatively) painless way to save more money gradually and take advantage of the power of compounding over time.
1 Binette, Joanne, “Where We Live, Where We Age: Trends in Home and Community Preferences,” AARP, November 18, 2021
Opens in a new windowhttps://www.aarp.org/pri/topics/livable-communities/housing/2021-home-community-preferences/
2 "Why Health Needs to Be Part of Retirement Planning," HealthView Services, June 8, 2019
Opens in a new windowhttps://hvsfinancial.com/2019/06/08/why-health-needs-to-be-part-of-retirement-planning/
Susan Johnston Taylor has written about personal finance and business for The Atlantic, The Boston Globe, Fast Company and U.S. News & World Report.
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