1. Take a Mini
Retirement or Gap Year
If you are emotionally or
psychologically ready for retirement, but your finances are not quite there, you
might explore taking a mini retirement – an extended (3-12 month) vacation from
work.
Many people nearing retirement age find that an
extended break from work is enough to recharge and re-energize. The trick is
convincing your employer to let you have this precious time off. According to the
Society for Human Resource Management, unpaid sabbatical leave is offered officially
by only 12% of employers and only 4% of employers offered paid leave programs.
However, it may be worth exploring your individual
situation with a human resources manager.
Quitting your job with the hopes of finding a similar
job upon your return is another option. However, many people who take a retirement
gap year actually discover an encore career and new passions during their mini
retirements.
If this idea interests you, learn more about taking a
sabbatical, mini retirement or gap year. Or, model a gap year in your retirement
plan with the NewRetirement Planner.
2. Prioritize What’s
Important and Dramatically Scale Down Expenses
Living
frugally is never going to be easy street, but it can be extremely rewarding to stay
focused only on the things that are truly important to you.
Most financial advisors make the assumption that we
need to maintain our lifelong spending habits when we retire. While this IS true for
most of us, many people redefine themselves in retirement and can dramatically
reduce spending – one of the best ways to retire securely.
Retirement is an excellent time to take stock of what
you have and what you want. If you know what is most important to you, you can set
goals and figure out a way to achieve your highest priority.
A few
tips:
Look Carefully at Your Current Spending:
When you have established what is important to you, assess your current budget. Take
a really detailed look at everything you spend money on – many people are surprised
to learn how much little things that don’t really matter in the long run can add up
over the course of a month.
Create Detailed Projections: Use the
NewRetirement Planner to create a detailed budget for your projected spending. When
you get specific about your needs and how those will vary over time, you may find
out that you are much better off than you thought.
Cut Costs:
Figure out how to slash both the big (eliminating your car can create sizeable
savings) and small costs. Get rid of anything and everything not related to your top
priorities.
Assess Lifestyle: Take a look at where you live, who
you spend time with and what you do on a daily basis. If these aren’t in line with
what is important to you, then make changes that can save you money and help you
live a more meaningful life.
Remind Yourself About What is
Important: Write down your retirement priorities and refer to them
daily.
It may even be helpful to write a list every day about what you want to
accomplish and why. These simple tasks can help you stay on track.
3. Or, Spend More!
(Just Not Every Month) Huh?
Yes, your heard me right. You
could perhaps spend more in retirement and still have a secure future.
You see, a lot of people plan retirement thinking that
they will keeping spending the same amount forever into the future as they do now.
However, that is probably NOT what is going to happen.
You might need and want to spend more right after you
stop working when you are relatively young and want to travel or engage in new
hobbies. But, your spending will likely drop off as you get older. (Many people
follow a pattern of spending more right after retirement, gradually reducing
spending until near longevity when long term care or medical costs balloon your
outlay.)
Thinking through the details of your retirement
spending and giving yourself some leeway to spend more (maybe just a little bit
more) in certain years and less (perhaps much less) at other times might just enable
you to retire sooner than you had planned.
The NewRetirement Planner helps you think through
detailed budgeting for your future and you can vary your overall spending as well as
your spending in individual categories to get to reasonable projections.
4. Think Outside the
Box (Rethink Housing)
Many people don’t think much about
their home when creating a retirement plan. However, your home is probably your
single greatest expense. According to the Employee Benefit Research Institute, the
cost of home and home-related expenses accounts for about 43% of spending for those
who are 65 to 74. Reducing this cost could be one of the best ways to retire
securely.
Furthermore, if you own your home, then it is also
probably your most valuable asset and one that could be used to help fund retirement
expenses.
Rent Out Your Home or a Room in Your
Home: House sharing is becoming more and more common. And, Airbnb has
absolutely exploded in popularity. Renting out a room in your existing home (or your
whole home when traveling) – either on a permanent or short term basis – can be a
great way to help fund retirement because it uses an existing resource to generate
money. Learn how to become an AirBnB host here.
Downsize: If
reducing housing costs and releasing your home equity interests you, downsizing may
be a great option. When you downsize you sell your existing home and buy or rent
something less expensive. It can be a smaller home or a residence in another
community. Learn more in this complete guide to downsizing.
Go Teeny
Tiny: There is downsizing and then there are tiny homes. If you think
that you could live in 500 square feet or less, then a tiny house could simplify
your lifestyle and finances. And, did you know that about 40 percent of tiny houses
are inhabited by older adults? Is a tiny house the big solution for your retirement
plan?
Get a Reverse Mortgage: A reverse mortgage is a loan
against your home equity. However, unlike traditional mortgages, you do not have to
pay back the money borrowed as long as you are living in the home. If you want to
stay in your existing home, a reverse mortgage is an interesting way to eliminate
ongoing monthly mortgage payments and get access to cash to use for retirement
expenses. More about reverse mortgages.
Hit the Road: A few
retirees sell most of their possessions – including the home – and hit the road.
Could you imagine living in a motorhome or houseboat and traveling during
retirement?
5. Pay Attention to
the Big Opportunities
Besides housing, taxes, debt and Social
Security are probably the biggest levers you have for making retirement work with
inadequate savings.
Debt: Imagine if you could spend the money
you are currently using to pay down your debts every month! Being debt free costs a
bit up front, but it is key to being financially free in the long run. Paying
interests on debt is akin to lighting money on fire. Get rid of your debt as soon as
possible.
Taxes: Being tax smart with your retirement plans can
mean more accurate projections and more money in your accounts. From where you live
to income planning, there are many different ways you can reduce your tax burden.
The NewRetirement Planner will help you discover opportunities.
Social
Security: So, what could you do with an extra $100,000? A lot I’ll bet!
Waiting to start Social Security could potentially get you that kind of cash.
The
longer you wait to start benefits, the more you will receive monthly and this can
add up to a $100,000 extra at your disposal – depending on how long you live.
6. Find Work that
Feels Like Play
You don’t want to work – working is not
“retirement.”
However, maybe you enjoy cooking, woodshop or spending time
with dogs. There are more and more ways to make money from these types of hobbies.
If there is something you enjoy doing, you can probably figure out a way to get paid
for it.
DogVacay and Rover – Offer dog sitting in your own home
or take a dog for a walk.
TaskRabbit – Provide home services
like house cleaning, gardening, handy man, errands…
Traveling Spoon and
Tastemade – Sell home cooking or home cooking
experiences.
Etsy – Sell handmade goods.
Shutterstock
and istockphoto – Sell your photographs.
7. Retire Abroad
The United
States, especially certain parts, are extremely expensive places to live. Retiring
abroad can offer adventure and a dramatic reduction in cost structure for your
retirement.
There are affordable places to live in all corners of
the world – places where the climate might be a little warmer, where the cost of
housing might be a little (or a lot) less expensive, and the healthcare might be
more affordable.
But is it realistic to think you can afford to spend your
retirement years living in some exotic locale? Not only is retiring abroad
plausible, the number of retirees who have actually done this has more than doubled
since 2006. And the kicker? They’re doing it for a lot less money than you might
think, some as low as $40 per day!
8. Don’t Set
a Date – Transition into Retirement
Once upon a time, long
long ago… we set a date and planned a big party for retirement. You went to work one
day and then never again.
These days more and more of us have a different
perspective on a retirement date. Retirees today transition into retirement either
by going part time for a few years or we find a retirement job.
9. Stay Healthy and
Make Good Insurance Choices
Some retirees spend more in their
lifetime on out of pocket healthcare costs than they earn in Social Security.
You can do a lot to cut those costs by staying healthy and
by choosing Supplemental Medicare Coverage carefully.
Shopping around for the
best supplemental Medicare plan should be done every year. Plans change. Your health
needs change.
10. Have a Detailed
Retirement Plan and Make Smart Retirement Decisions
Creating
a retirement plan might not seem like one of the most “creative” ways to retire.
However, only 30% of Americans have a long-term
financial plan that includes savings and investment goals and a detailed outline for
their retirement finances. So, if you have a plan, you are at least unique – if not
creative!
And, the good news for planners? The retirees who went
through a rigorous planning process to figure out “how to retire” expressed the most
satisfaction with retirement.
The NewRetirement Planner makes it easy to create a
detailed plan and discover ways to retire securely. Beyond these “creative” ideas –
explore how delaying the start of Social Security or optimizing investments can give
you a better future.
Start by entering some basic information and get some
initial feedback on where you stand. Then you can add a lot more detail and really
get an accurate estimate for how much you need.
Best of all, you can try an infinite number of
scenarios. See how downsizing, a retirement job, or reducing expenses will impact
your finances. Forbes Magazine calls this system “a new approach to retirement
planning.”
Source
https://www.newretirement.com/retirement/creative-ways-to-retire-securely/