Gearing Up for the Golden Years

“Retirement is the next chapter of your life on your own terms,” says New Rochelle resident Sharon Epperson, a CNBC correspondent who covers personal finance. “In retirement, you want to have the luxury of choosing what you want to do.”

For some, retirement still means soaking in the rays in Florida, playing golf and bingo, and spending quality time with the grandkids. But for many others, retirement now means a chance to start a new phase of life, one that may be just as busy—and perhaps even more fulfilling—than the previous one.

In its August 2013 article, “Redefining the ‘Ideal’ Retirement,”  Time magazine wrote, “For the financially prepared, this is an exciting time with many options. Sometimes the ideal retirement involves working full time—but at something completely different. It might mean volunteering, teaching, mentoring, consulting, getting into politics, writing a novel, or going back to school—for the fun of it.”

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Epperson agrees. “I’m meeting a lot more people who want to do something, whether it’s advising or running a nonprofit or something where they are still engaged in work, but on their own terms,” she says. “I think that is a healthier way of thinking about retirement.”

For example, Cross River native Christopher Vecchio, a 24-year-old currency analyst who now lives in Manhattan’s Financial District, knows he is going to do something fulfilling in his retirement. “I imagine I’ll be involved with something that requires a great deal of my attention and passion,” he says. “Part of me says I don’t ever want to retire, merely switch careers to something less stressful and more fun. I’ll be upset if I view retirement as an escape.” 

If this is what retirement is—a time of your life to follow your dreams and do whatever you want to do—it sounds fantastic. But it takes a lot of planning and work to get to that phase—and fund it.

The first step to preparing for your retirement, says Epperson, is to envision your life as an elder and calculate how much it is going to cost. “It’s hard sometimes to anticipate what retirement is going to look like for you, but there are a couple of things you may want to think about as early as you can,” she says.

 Some questions you should ask yourself are: Where do you want to live? What activities do you want to do when you are retiring? (Travel can be expensive; volunteering is not.) Will you have a new job that may offset expenses or pay for them completely? Do you need funds to start a new business? At what age do you want to retire? Will you be happy working longer than planned if you need additional revenue?

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Then there are tools you can use to calculate how much your lifestyle might cost. Websites such as NerdWallet and Bankrate provide free cost-of-living calculators (you can compare the cost of living in Florida versus Vermont, for example) and the Social Security Administration website offers an easy-to-use tool to estimate how much you will spend in retirement based on your age, city, and lifestyle.

 After you estimate how much you will need comes the difficult part: saving. “The hardest part is actually stopping the amount of spending that you are doing, cutting back on it enough so you have enough money to save, and being diligent and disciplined,” says Epperson.

In her book The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money—and Live Richly Ever After, Epperson recommends following a budget named the “60-percent solution”: 60 percent of your gross salary is spent on expenses that you have to pay (mortgage, utilities, taxes, debts, etc.); 20 percent is dedicated towards long-term savings (saving for retirement, college, etc.); 10 percent to short-term savings (cash in case of an emergency); and 10 percent for “fun money” (spa days, ski trips, etc.). If saving 20 percent long-term seems too difficult, says Epperson, try collecting all your receipts and really looking at where your money goes. “Once you start adding up all of those receipts, you start to see where you can cut.”

It is important to start saving early, even if retirement seems a lifetime away. “If you’ve had your 21st birthday celebration, it’s already time to start thinking about saving for retirement,” says Epperson. Take advantage of your company’s 401(k) program, or if you are self-employed, set up an IRA. Not only does that money add up over the years and gain interest, but it also turns into a habit and discipline that “will hopefully stick with you even when you are going to be thrown off course a bit.”

Perhaps because he already has a vision for his retirement, Vecchio has started early to heed that advice. He has been saving since he was 23 and already has a 401(k) to which he contributes 3 percent of his paycheck, as well as a savings account that receives 2 percent of his salary. 

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While he says most of his friends aren’t saving (and might think he was silly for starting so young), he believes it is important. “Unless my friends plan on paying for my retirement, I don’t really care what they think about my savings habits. I know what I am doing is right for my, and my family’s, financial future. I am specifically saving so that I am not stuck in a situation that I don’t have control over,” he says.

And that money you are saving shouldn’t just sit in a savings account. Rather, it should be reinvested so it will multiply. A simple way to do this is to put your savings in a target-date fund (TDF) or a portfolio that diversifies your investments. You can also work with a financial advisor who can guide you on how to invest your money. While some work with you on a regular basis and take a percentage of your earnings, others can be hired hourly and look over the work you do on your own. (Garrett Planning Network is a valuable resource for finding hourly advisors around Westchester.)

Starting in your 50s and 60s, you should turn your efforts toward preparing for health issues that may arise during your retirement years, says Anthony Enea, a White Plains lawyer who specializes in elder law. “No matter how well your investments are doing, unless you are truly a multi-millionaire, you aren’t prepared to spend $150,000 a year in a nursing home. [People] really need to be thinking about their long-term care and the cost of it and whether they are prepared for that cost.” (As people are living longer and more health issues arise this focus becomes even more important.)

 Glenn Staub, a 49-year-old living in White Plains, felt the pangs of not adequately preparing for healthcare when his mother was diagnosed with dementia in her late 70s. “She progressively needed more healthcare,” he says. “She went from having an aide come to the house three or four days a week until she needed someone to live in and, at the end, she needed two people to live in. We were going through about $320 a day.”  

The cost of this care ate away his mother’s assets (assets that would have been passed along to him as her sole heir), something that could have been avoided by subscribing to a long-term health-insurance plan or putting her assets away in a trust that would have protected them when she got sick. The most common way to do this, says Enea, is by placing your assets in a Medicaid Asset Protection Trust. That step makes you eligible for Medicaid, public money, even if you have a substantial amount of assets.) 

While preparing for your retirement may sound stressful, says Epperson, it helps to know what you will need and then put a plan in place that helps you save, one year at a time. “Just like you try and have a career plan, just think that far ahead in terms of financial planning: ‘In a year, I would like to have this much saved.’”

And eventually, if you save correctly throughout your working life, your savings will add up to an ideal retirement.

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