Women facing retirement often worry about whether they have enough money saved to live their desired lifestyle in retirement. This can lead to stress and worry. This week I share 10 retirement tips that can help women retire with more confidence and less worry.
10 Retirement Tips:
1. Start Saving and Investing Early.
When it comes to saving and investing, “time in the market” matters way more than “timing the market.” The sooner you start saving for retirement, the more time your investments have to grow. Remember to Pay Yourself First! Plan to take advantage of retirement accounts like 401(k)s or IRAs and contribute regularly. Don’t miss out on any company match. You can also consider seeking advice from a financial advisor to help create a personalized savings and investment plan, particularly if you are a late starter.
One of my favorite examples of the power of starting to save and invest early comes from Morgan Housel’s The Psychology of Money. Buffett started saving when he was 10. By age 30, his net worth was $1 million. By age 50, he was worth $300 million. When he reached his Social Security full retirement age of 65, he was worth $3 billion. At 91, his net worth was $96 billion.
What if Buffett was more “normal” and had $25,000 when he was 30? (That’s still way more than I had at that age. Then assume that he retired in his 60s like most of those in his generation hoped to do. His net worth would be $11.9 million today. That’s still a big number, but it’s $95.989 less than $96 billion.
Even if we assume that Buffett had the same level of financial knowledge, investing skill, discipline, effort, and focus, the difference would be huge. Why is it so big? TIME! This shows the power of compounding. The more time you give your money to grow, the more it can grow.
2. Set Clear Financial Goals.
Determine your desired retirement lifestyle. Estimate the expenses associated with it. Minimize your spending on things that don’t matter that much to you.
If you have a clear understanding of your financial goals, you can develop a more focused and effective retirement savings strategy. This approach can also help limit how much money you spend on things that don’t bring you joy.
3. Diversify Your Investments.
Diversification helps you manage risk and can benefit your returns. Consider spreading your investments across different asset classes, including stocks, bonds, real estate, and international markets. Don’t forget to include companies of different sizes (market caps) as well.
Diversification can help protect your portfolio from market volatility. While it may limit a given year’s returns, it should also help minimize losses. In the end, diversification can enhance your portfolio’s long-term growth potential.
4. Minimize Debt.
The first three retirement tips centered on saving and investing. But you want to keep your expenses down as well. Limiting debt represents one of the best ways to limit your expenses. Only buy things that you can afford. Save for the things you can’t buy today.
You can take out a mortgage to buy a house. But make sure you can manage the payments. Ideally, you want to put enough down to keep from paying purchase mortgage insurance (PMI).
You might want to borrow to pay for a car. If you do, keep the monthly payment manageable. Plan to keep the car as long as you can. I like keeping cars as long as possible. We’ve put more than 200,000 miles on some of our cars. That allows us to have some years without car payments. That can make a big difference.
Save for vacations rather than finance them. The same applies to other things you need or want to do.
If you have debt, prioritize paying off high-interest debt, such as credit cards or personal loans, before retiring. If you reduce or eliminate your debt, you’ll have more financial flexibility and less stress during retirement.
5. Create a Realistic Budget.
I get it. Some view the word “budget” as a four-letter word. If you don’t want to track all your expenses, you can try this instead. Start with what you earn, or all the money you have coming in. Then look at your expenses.
First, consider your fixed expenses – the ones that don’t change from month to month. For example, your monthly mortgage payment or monthly rent. These should also represent the things you need to live. You also want to set a savings target and include that as part of your fixed expenses. You should certainly have something left after covering your fixed expenses and savings.
Next, look at your variable expenses. These fall into two categories. First, you have expenses that you need to live but the monthly amount can vary. This category can include your monthly utilities, gasoline, groceries, healthcare, and others. Then look at the discretionary items. For example, entertainment, dining out, travel, etc.
This exercise should help you understand what you’re spending your money on. It can also make it easier to cut or reduce expenses if you need to.
After looking at all these items do you have anything left? Do you have enough money to pay your monthly bills and save? If you do, then you’re in good shape. You’re doing better than many of your peers. If you have a shortfall, then you want to take a more detailed look at your spending and see where you can reduce expenses.
You should regularly review and adjust your spending to ensure you are living within your means, saving for your future, and have a clear understanding of your financial situation.
6. Plan for Healthcare Costs.
Healthcare expenses can eat up a significant portion of retirement savings. Research and understand your options for healthcare insurance now and in retirement. This includes Medicare and supplemental insurance plans. Consider saving or purchasing insurance to cover potential long-term care needs as well. If you follow the ninth of our retirement tips, you’ll note that it will help with this one, too.
Fidelity publishes an annual estimate of retiree healthcare costs. In 2022, Fidelity estimated that an average retired couple age 65 may need approximately $315,000 saved (after tax) to cover healthcare expenses in retirement.
The actual amount needed depends on when and where you retire, how healthy you are, and how long you live. The accounts you use to pay for these costs also matter. For example, the tax implications of using a 401(k), an HSA, an IRA, or a taxable account may vary.
Your gross income can have an impact on the cost of healthcare as well. For example, your Medicare premiums can also be impacted by your income. You can find out more if you check this table.
7. Seek Professional Advice.
Planning for retirement, especially when you are dealing with big life changes such as widowhood, divorce, career change, or an empty nest can be even more complicated. Consider consulting with a qualified financial advisor who can help you with retirement planning. Advisors can provide personalized guidance based on your unique circumstances. They can help you optimize your investments. An advisor can help you implement all these retirement tips. Plus, they can provide ongoing support to help you stay on track. Some can help you with tax planning that allows you to reduce your retirement tax bill.
Women who are facing significant life transitions can take things a step further by working with an advisor who can help them develop their life plan. Apprise believes that life planning represents financial planning done right.
Life planning helps you reorganize your relationship with money. It allows you to dedicate your financial resources in a way that supports a life of the greatest value, meaning, and purpose to you. It helps you align your spending with what matters most.
8. Stay Informed and Educate Yourself.
Take the time to educate yourself about retirement planning, investment strategies, and financial management. This includes staying updated on tax laws, retirement policies, and economic trends. Being well-informed will empower you to make better decisions.
There are three possible ways you can stay informed and educate yourself. To do it yourself, you need to have Knowledge, Interest, and Time (KIT). If you don’t have KIT, you can hire an advisor and let them worry about it for you. You can also hire an advisor who will help educate you along the way. This is Apprise’s preferred approach.
We enjoy helping clients understand the “why” behind the recommendations we make. We are also happy to help them understand things that they don’t know. On more than one occasion, we have had a client log into their account and share their screen. We can then help them navigate and understand issues that they are struggling with.
9. Maintain a Healthy Lifestyle.
This retirement tip is near and dear to my heart. I make exercising and eating right a priority. I also get more sleep than I used to. Prioritizing your physical and mental well-being can go a long way.
Invest in regular exercise, a balanced diet, and activities that promote mental and emotional health. A healthy lifestyle can result in lower healthcare costs and lead to more energy and enjoyment during retirement.
10. Plan for Social and Emotional Needs.
The last of our retirement tips goes a step further. Retirement is about more than finances. You will want to maintain social connections, pursue meaningful activities, and find purpose in retirement. You can engage in hobbies, join community groups, or explore volunteering activities. Doing each of these things can help you maintain a sense of fulfillment and well-being.
Closing Thoughts:
If you want to maintain your quality of life when you retire, you will want to plan. It’s hard to live your desired lifestyle if you don’t. Retirement planning also represents a continuous process. You should regularly review and update your retirement strategy as circumstances – as well as your wants and needs – change. By following these retirement tips and seeking professional guidance, you can retire with less worry and more confidence. They should help you believe that you have taken the necessary steps to secure your financial future.
On Thursday, June 15th at 1 pm, I will be leading a Facebook Live session – The Intersection of Life Financial and Life Planning: Achieving Your Dreams – hosted by Purse Strings. You can find more information at this link.
Next week, please look for our Tuesday Tips video blog.
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For firm disclosures, see here: https://apprisewealth.com/disclosures/
Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
