Some seniors that are preparing to retire may be expecting to have to really cut back and watch their spending. According to a CNBC.com article on the subject of standards of living in retirement, “One out of three workers expect their standard of living to decrease when they retire, and 41% think it will stay about the same, according to a survey of 4,143 full-time and part-time workers commissioned by the non-profit Transamerica Center for Retirement Studies.”
We however are hoping and even expecting to maintain our standard of living in retirement. By doing some work in advance of our golden years, we plan to make a smoother transition from our working to our retirement lifestyle.
Maintaining an even keel before retirement
Part of preparing for a smooth transition to retirement involves not overdoing it when it comes to our purchases during our time with jobs and careers that come with regular incomes. We delay gratification through avoiding the need for the latest and greatest when it comes to things like phones, computers, tablets, phones, vehicles, clothing, and more. By training ourselves to reduce or eliminate the temptation to buy in discretionary budget areas, it’s not hard to maintain this outlook as we move into retirement.
But beyond this self-discipline, there are two main things that we use to help us keep our costs in line and at reasonable levels. We utilize a budget that allows us to gauge costs as we move throughout the year and compare them to our income, and we also use a forecast to predict both future income and expenses.
Understanding finances now and in the future
By tracking our expense and income information and harnessing the data that our budget and forecast provide, we have a better understanding of our finances both now and in the future.
Maybe the most important way that this data helps us is through the development of a personal inflation rate. By being able to see how expenses increase year-over-year, we’re able to better contain our spending, have a more realistic expectation of what costs will be in retirement, and are able to compare what savings and income will need to be to cover these costs in our golden years. Being able to see these eye-opening numbers helps bring reality home and keep us on track when it comes to keeping costs low.
Forecasting realistic adjustments to income
But just focusing on maintaining lowered expenses in retirement won’t help us continue our current standard of living if we don’t have the income there to cover costs. We also have to focus on realistic expectations of income, and a large part of this is being aware of and prepared for adjustments to this income.
Things like inflation, new tax laws, economic and stock market conditions, and adjustments to benefits programs can all have an impact upon future income, and some such changes, while not currently occurring, are potentially predictable.
Take for example Social Security. According to recent Social Security Administration reports, without changes to the current system, estimated benefits could be reduced by nearly 25 percent by the year 2033. This could be of critical importance to a huge number of retirees and could greatly influence how adjustments should be made to prepare for the reduction of this particular retirement income stream. Depending upon the health of pensions, the stock market, and interest rates, similar adjustments might need to be made to income projections in other areas as well.
More From This Contributor:
Building a Revenue Producing Blog
I Won’t Be Waiting to Take Social Security
Preparing to Publish My First E-book
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.