As a recent retiree, Bill Storie, Founder of Olderhood, examines the factors of your current lifestyle that you CAN change as you approach “R-Day” … and the factors you probably CAN’T.
Can I change my Wealth … ?
Is Health a more important factor than Wealth or vice versa.
Most people agree that Health is #1, but that Wealth is a clear #2.
Ask yourself these questions and you’ll find out :-
- If I have vast Wealth but poor Health, am I happy..?
- If I have good Health but no Wealth, am I happy..?
One of the main issues regarding Wealth is the obvious question … “Will I have enough to retire on..?
The first issue is to differentiate between Income and Value.
Income is simply the amount of cash inflow you need, to live the lifestyle you want in retirement. When you were working this would have been your salary plus cash investment income (and any other income streams). In retirement it will be pension income and investment income, in cash.
Value is the value or principal, of your pension and investment portfolios. If this number increases or decreases, it does not materially affect your income cash flows. And of course, if you don’t have to dip into this Value pool, then this will constitute part, or all, of your estate (for the kids or whomever).
The second issue to consider is how much actual Income do you realistically need to live the retirement lifestyle you want.
Traditionally, the experts tell us that you must have about 75/80% of your immediate pre-retirement annual income in your retirement years. In fact, that is probably not true. You should be able to live the lifestyle on considerably less than that.
You have probably paid off your mortgage + no more education expenses for children + got pretty much everything for your house + probably don’t need too many more clothes or “things” e.g. new car, and so forth. You probably find you eat less, use less electricity, use less gas in the car, don’t drink as much, etc. In other words, the pre-retirement lifestyle may have shrunk in retirement. Maybe not, but chances are you can get by on much less than 75/80%.
So, unless you were totally reckless and did not save for retirement at all, then you probably have enough to retire with, certainly in income terms.
The fact of the matter is that you have very little, if any, ability or influence, to change the income flows. Yes, you might have one or two good equity investments which hit the high spots, but generally speaking, “wot u got, u got !!”
So, chill. You can worry about it for sure, but unless inflation kicks into high gear, then you’re probably fine. Ergo, why worry – be happy … !!
If you need extra income because you mis-calculated, or just want to do more extravagant things now that you’re retired, then go find a part-time job. We’ll discuss this later in this Series, but, assuming you CAN get a part-time job, then this is a clear option to bolster the Income part of the equation. Most likely it will do little, if anything for the Value part, but a little bit of extra cash may be useful, plus gives you something to do.
So, to sum up :-
- You can’t turn the clock back to increase your income generation. So don’t spend too much time regretting what you could have, or should have, done. Move on.
- If you have to use some of the Value as Income i.e. dip into the pool, then try to work out a reasonable annual amount, which is loosely based on how long you reckon you’re going to live ……… again, more on that in a later Part of this Series.
Next week Part 3 – What will I Do..?