Retirement planning

What people overlook

The numbers are in. People show as much interest in retirement planning as they would in a root canal. That may be an exaggeration. But, at least according to one survey, the working population spends more time planning their vacation than they do their retirement. While planning a vacation may seem more fun in the short-term, your long-term fun will depend on how well you plan for your future.

To be fair, there are lots of things to consider when planning for retirement. Things like organizing your finances, deciding when and where to retire, whether you should downsize or not, how you’ll keep up with inflation, the impact of your investment returns and how much money you need to be saving. It can seem overwhelming. But it’s doable. And necessary.

There is one ‘must-do’ when it comes to retirement planning. Strangely, it is often overlooked amidst all the number-crunching and soul-searching.

Ever-increasing lifestyle costs.

When you were young and starting out, you were content with an old beat-up car, a modest apartment and an occasional ramen dinner (at home, not at that trendy ramen restaurant). But as you grew older, your income went up. You bought a house, maybe started a family, and then bought an even bigger house. Your 2-door hatchback and studio apartment could no longer accommodate your bigger life. You started to appreciate fine wine and travel abroad. Maybe you sent your children to a private school, and gave them all this world has to offer with music lessons, sports teams and specialized summer activities.

That’s all well and good. But such things often come with a heavy price tag that can creep up on you. Monthly spending can jump ten or twenty-fold in as many years. You may be making more money than you ever dreamed of. But saving? Not so much. We might call this spending creep lifestyle inflation.

We could talk about slightly more glamourous stuff like asset allocation, tax minimization strategies and the like. But there are simpler, more basic things we should be discussing, like living below our means, saving (a lot) more and paying off our mortgage. Covering these basics will go a long way toward creating a comfortable retirement. In particular, committing to keep your lifestyle expenses to a reasonable level will help your money last. It’s really just common sense, simple math. It simply takes less money to support a modest lifestyle than an extravagant one.

If you are younger, we suggest you frequently and deliberately check your lifestyle spending. Keep in mind that your earnings will likely not keep increasing in perpetuity. Maybe you don’t really need that European SUV. If you get a substantial raise, spending it on some nice upgrades sounds nice, but how about putting some (or most) of it into your retirement savings or other savings accounts.

If you are approaching retirement, perhaps you can start simplifying. You might start by going through your possessions and throwing away or donating things you don’t need anymore. As empty nesters, your house might be too big, so maybe it’s time to downsize (or right-size).

Bottom line? A reasonable lifestyle in retirement is a heck of a lot easier to fund.

Advisory services are offered by Joslin Capital Advisors, LLC, an SEC Registered Investment Advisor.

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