With Augusta, GA at the top of many retirees “Top Places,” it’s a question that many pre-retirees find themselves asking – How much money will I need to keep my current lifestyle in retirement? What’s more, will I have enough to live the retirement I’ve been dreaming about?  

A few years ago, as we struggled with a significant bear market and the country’s financial crisis, the idea of achieving an ideal retirement seemed to take a backseat to ensuring retirement essentials were handled. Today, people are again envisioning a truly fulfilling retirement. At the very least, most people want to carry over the lifestyle they became accustomed to in their working years. Given that people also will likely have more free time after they set work aside, retirement can mean much more. 

What are ‘lifestyle’ expenses?

It is helpful to categorize different types of expenses you will face in retirement. For starters, there are essential expenses, the basic costs of living. This includes food, shelter, utilities, medical care and similar types of costs associated with day-to-day living. Lifestyle expenses can vary based on your own priorities. They may include:

• Travel
• Hobbies
• Recreational activities
• Owning and maintaining a second home
• Investing in your own business venture 

Costs for these types of expenses can vary widely depending on the types and specific nature of the activities you wish to pursue. For example, if you plan to travel the world for a few years after you retire, that may require a significantly greater investment than taking trips to various parts of the U.S. or spending time at your vacation home. 

Another nuance to lifestyle expenses is that they may fluctuate from year to year. Some retirees choose to pursue a very active lifestyle in the first years of freedom from work and their expenses may be higher in the early part of retirement as a result. Then lifestyle expenses may decline as they grow older and are less able to pursue certain activities. It’s important to consider how your retirement lifestyle may change over time. 

Good planning may help make your desired lifestyle a reality

Most people who are able to achieve their ideal retirement don’t do so by accident. They plan ahead and develop a savings and investment strategy to make it happen. No matter your age, here are three important steps you should consider starting now:

1. Map out your dreams for retirement. Try to identify specific goals and activities that you want to pursue.
2. Estimate the costs of your ideal retirement lifestyle, in terms of monthly or annual expenses. Try to leave some cushion in your estimates in case actual costs exceed your expectations. Keep in mind that even with modest inflation it will likely cost more down the road than it does today.
3. Develop a plan to fund those goals. This includes a dedicated savings strategy that is increased every year to account for inflation. Consider tempering the risk in your portfolio as retirement draws closer.
4. Test the plan the year or two before you retire.  Before my Mom retired she was very concerned about being able to live on the budget we had estimated for her.  These concerns disappeared when I had her limit her spending while working to the income she anticipated in retirement, and build up her savings.  By living the budget she realized not only how comfortable she would be in retirement, but how much money she was spending on things that just were not that important before she set up the budget.

The good news is that you can dream about retirement again. However, those dreams don’t become a reality without being proactive to make it happen. The sooner you start, the more successful you are likely to be.

Will Rogers, ChFC^®, CFP^®, APMA^® is a Financial Advisor and Certified Financial Planner^® practitioner with Ameriprise Financial Services, Inc. in Evans, GA. He specializes in fee-based financial planning and asset management strategies and has been in practice for 25 years. To contact him, please visit www.WRogers.info