How to budget to live to 100
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The average American can expect to live to 78.6 years according to the Centers for Disease Control and Prevention. That’s only an average. Some of us can expect to live much longer. Since we don’t know how long any of us has, stretching your retirement savings will be essential. With a bit of planning and creativity, you can enjoy a long, fulfilling life without financial hardship. Here are some tips to help you out.
A long-term care insurance policy can help cover your expenses in the event you develop a chronic medical condition, disability or disorder that requires an extended stay in a long-term care facility.
Since the average cost for long-term care in the United States is $225 a day or $6,844 per month, a long-term care policy can save you from depleting your retirement savings. “It’s a good idea to obtain a long-term care insurance policy when you’re in your 40s or 50s as the cost of one can significantly increase once you hit your senior years,” says Brian Sheahen, a certified financial planner at Hudson Oak Wealth Advisory who helps clients stretch their retirement savings.
By investing in long-term care insurance long before you may need it, you can enjoy the peace of mind of knowing you won’t be left with hundreds of thousands of dollars in long-term care costs in the future.
Determine what your fixed and variable expenses will be in retirement. Once you come up with these numbers, figure out how much you’ll need to pay yourself every month to cover your expenses and live comfortably. Then, pay yourself this amount every month. (Not saving enough for retirement? Learn how to catch up.)
“Systematically paying yourself instead of taking out large sums of money that you’re likely to spend can help you maximize your retirement savings. This is a great way to prevent overspending and help you get into a financial routine,” Sheahan says.
Your expenses may increase or decrease over time so be sure to review them on a yearly basis and make changes to your “personal paycheck” as necessary.
Instead of going from a regular income to no income at all, consider transitioning into semi-retirement by getting a part-time job. “Getting a part-time job and working before you completely retire is a particularly smart move if your debt isn’t paid off and isn’t going to be paid off within one to three years of retirement,” says Sheahan.
By getting a part-time job in an industry you enjoy or at a company you are passionate about, you can eliminate your debt and make it easier to manage your monthly expenses once you leave the working world for good.
The cost of living differs from state to state. If you spent your working years in a high-cost state such as California or New York, you may want to relocate to a more affordable state like Florida or Texas.
“Although relocating may not be an option for everyone, it may be well worth it for someone who doesn’t have much family around and would like to reap the benefits of cheaper taxes and housing as well as cheaper food and entertainment costs,” says Sheahan.
You may find that you’re not able to maintain the same lifestyle you had when you were working if you remain in an expensive area.
If your children and other family members are accustomed to you providing for them financially, don’t be afraid to meet with them and set realistic expectations. “You may no longer be able to treat your son or daughter to dinners out and vacations once you retire and that’s OK. Just be honest with them and make sure they know what to expect,” says Sheahan.
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