The theme this week on the One Minute Retirement Tip podcast is: Get These 4 Things Right For A Successful Retirement.
What are these 4 things? They’re known as the 4 L’s of retirement and the concept was developed by retirement researcher, Dr. Wade Pfau.
The 4 Ls of retirement are longevity, lifestyle, liquidity, and legacy. Today, we’re focusing on lifestyle.
Now that we’ve addressed your basic needs with the longevity and understanding the importance of sustaining your essential expenses in retirement, and you are confident that you won’t run out of money to cover your basic needs in retirement, we get to the fun part!
Lifestyle goals in retirement are all about how you want to live your life, and they tend to be more discretionary in nature.
What are your travel plans? If you live in the northern half of the U.S. like me, you may be dreaming of spending the winter months of retirement somewhere warm and sunny. Or maybe you just want to be able to visit the places and new experiences that come with a travel budget of $10,000 a year.
Travel is probably the most common non-essential lifestyle spending goal I see among my clients, but the list of lifestyle spending (aka discretionary spending) goals in retirement is quite long and varied. Some other common examples are:
Buying a new car every few years, paying for a large one-time expense like a wedding or a home remodel, buying a 2nd home, a boat, or an RV, starting a business, setting up and funding college savings accounts for grandchildren, helping a child with their first home purchase, or funding hobbies like a golf club membership or dues for your speed knitting league.
What you’ll want to do with each of these discretionary spending goals is add it to your overall spending plan and see if it pencils out.
It’s easier to plan for the regular lifestyle goals like monthly dues for a membership, but it’s much more challenging to plan for a large one-time expense like a home remodel. Can you afford to withdraw $100,000 for a major home remodel 5 years into retirement? Maybe, maybe not? It depends on the size of your portfolio, how much you’re withdrawing from your portfolio for your other income needs that year, and frankly, the unpredictable ups and downs of the stock market...because even if you plan to take a withdrawal for a large one-time purchase, you may either need to set aside the amount you need in cash gradually, or you may need to delay that remodel if your portfolio takes a hit because of a drop in the stock market. You don’t want to make the problem much worse by piling on to that loss with a large withdrawal.
So think about your lifestyle retirement goals as the goals that help you enjoy retirement and add that spice and fun to life that we all desire. What do you want to do in your retirement years? How do you want to spend your time and money? And most importantly, can your income sources and your retirement portfolio support those lifestyle goals.
That’s it for today! Thanks for listening.My name is Ashley Micciche and this is the One Minute Retirement Tip.
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, retirement income planning, retirement income sources, retirement income, retirement income withdrawal, retirement spending strategies, how long will money last in retirement, do I have enough to retire, retirement lifestyle