- Spend time with my family
- Volunteer at the local food bank
- Find a part-time job
- Travel across the country
When it comes to retirement, everyone has different dreams, goals, and priorities. And, that’s why your personal retirement income strategy starts with you, defining your vision of the future.
Define your vision of retirement
As you begin thinking about your personal vision of retirement, list your retirement plans and goals and then prioritize them. This exercise helps you visualize how you’d like to spend your time in retirement and how your personal lifestyle choices may affect your income needs in retirement.
- Take up nature photography
- Purchase a beach condo
- What’s next...
And, remember that retirement is shared between you and your loved ones. While you may hope to travel the world, your spouse or partner may want to see your grandchildren off to school each morning. Now is the time to make sure you are on the same page with anyone who plays a key role in your life.
Factor retirement risks into your overall retirement income strategy
Retirement in America is changing— retirees are living longer, fewer companies offer pension plans, and Social Security benefits may not be your primary source of retirement income. And, that’s why it’s more important than ever to consider potential retirement risks, which play a primary role in planning your retirement income and expenses:
- Longevity risk — With Americans living longer than ever before, it’s important to understand the risk of outliving your retirement savings.
- Inflation risk — Inflation lowers the purchasing power of your dollar, so be sure to factor inflation into your overall retirement saving goal.
- Market volatility risk — Your investable assets may lose value if the financial markets decline.
Other potential risks to your retirement income are the rising costs of health care, long-term care, and insurance coverage to supplement Medicare. And, while it’s important to educate yourself about market and event-driven risks, it’s equally important to put your money to work: Structure your retirement investments in a manner that will help mitigate these risks.
How much money should I spend in retirement?
The next step is to estimate expenses and income needs in retirement each year. While many industry experts suggest you’ll need about 80% of your preretirement annual income to live a comfortable retirement, you may need more or less depending on your personal retirement goals and projected retirement expenses.
Plan your retirement budget
Dividing your expenses into the following three categories may help you plan for your retirement income needs.
- Essential expenses are basic, ongoing expenses like food, mortgage or rent payments, transportation, insurance premiums, taxes, basic health care costs, and other nondiscretionary living expenses.
- Discretionary expenses include nonessential expenses, such as entertainment, travel, recreation, charitable giving, and major purchases. Because these expenses are not essential, you can adjust them if your lifestyle or financial situation changes.
- Unexpected expenses include various long-term and unexpected expenses, such as major health care needs, long-term care services, and personal emergencies.
And, as you plan your retirement budget, remember that a truly realistic approach to retirement planning doesn’t just allow for changes in your personal and financial circumstances, it takes them as a given. That’s why it’s important to have a dynamic spending strategy — one that you can adjust as your circumstances change. Here are a few steps you can take today:
- Print our retirement worksheet to help plan your retirement expenses and income sources.
- Create a personalized budget with Budget Watch. How will your budget change when you retire?
- Use My Spending Report to track the purchases you make using Wells Fargo credit cards, debit cards, Bill Pay, and checks. How will your spending patterns change in retirement?