Predicting exactly what your retirement will be like is about as possible as a meteorologist predicting the weather correctly every single time. In fact, few retirees find their financial futures playing out precisely as they assumed. Getting familiar with some of the usual assumptions about retirement can help you answer the question "how does retirement work?"
How does retirement work? Will I really "outlive" my money?
Generations ago, as people retired, many did live in dire straits, sometimes “down to their last dime,” which lead to the creation of Social Security. Today, Social Security is still around and a common supplement to one’s retirement strategy.
To find out how much you can expect to receive from Social Security income, create an account or sign in to the Social Security Administration website.
If you find that you will not receive as much as you need or were hoping for, this might become a really good reason to invest so that you have more funds coming in (and don't have to rely on a smaller Social Security check).
How does retirement work? Will I be able to spend as much as I do now?
A quick internet search reveals all sorts of sources instructing new retirees should strive to retire on 70-80% of their end salary, but it can be a tough one to achieve.
Most new retirees often want to travel, explore new pursuits, learn some hobbies, and finally get around to those things they had put off when they were too busy with work. So, in the first few years, some may spend roughly as much as they did before in retirement money..png?width=548&height=259&name=Couple%20on%20Vacation%20with%20Feet%20Kicked%20Up%20(1).png)
For many retirees, spending increases on the way to a retirement transition. But, with a smart financial strategy, the annual median household spending in retirement tends to decline gradually after age 60 and begins to plateau when people reach their early eighties.
Practice makes perfect, even in retirement
On average, households headed by those older than 65 spend 25% less annually than younger households (a difference of more than $15,000). While health care spending increases in retirement, other household costs decline, particularly transportation and housing expenses. If you retire full-time, then odds are you will save a lot on income tax. However, if you're still working in retirement and need to complete your taxes, feel free to review our resource on 2024 tax brackets and deductions.
Living the life you want
In general, American retirees seem to have it pretty good. A recent survey found that 47% of American retirees feel that the time they put in before retirement allowed them to enjoy the same standard of living they had while working. Check out a few retirement mistakes to avoid so that you live the life you want in retirement!
Remain flexible in retirement
How does retirement work? By being flexible. Your retirement may differ slightly or even greatly from the retirement you imagined. Luckily, it may be possible to create an adaptable retirement strategy with the help of a financial professional. It’s never too late to start!
On your way to retirement? Keep up with a retirement checklist to track your progress.
Disclosures
This article is intended to be a general resource only and is not intended to be nor does it constitute legal advice. Any recommendations are based on opinion only. Rates, terms and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.
Mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
Alternative investments are not without their risks. They often have higher fees, which can reduce total returns. They are also complicated and less transparent investments. Alternative investments are less liquid assets and may not serve to reduce risk in extreme down markets.
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Investment advisory services offered through PFG Advisors, LLC, a SEC registered investment adviser. Securities offered through Osaic Wealth, Inc., member FINRA/SIPC. Insurance products offered through approved carriers. Copper State Credit Union, PFG Advisors, LLC, and Osaic Wealth, Inc. are separately owned entities and are not affiliated companies.
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