Retirement can mean many different things depending on your goals. For some people, it’s a time to connect more deeply with family by spending days, weeks, and months with children and grandchildren. For others, it’s a time to finally set the tools down and start exploring the world by traveling. Still, others consider retirement a time to stop and smell the proverbial roses. Regardless of your specific goals, various strategies can unlock that future for you.
What Kind of Retirement Lifestyle Do You Want?
The first step in deciding how you’ll work toward retirement is to consider what you want from retirement. Each approach involves having certain kinds of assets to reduce tax exposure and maximize financial stability.
Familial Connection
Those who are working to spend more time with family are likely to envision a future with children running about and multiple adults living under the same roof. While the nuclear family became the social standard in American mainstream culture during the mid-20th century, information from Flowing Data shows that it’s a diminishing majority of family arrangements. As that trend continues, more Americans are choosing composite or extended family arrangements. You can make that a part of your future by inviting other family members or close friends to live with you in a sizable home during your retirement.
Exploration
Many couples have a vision of the adventures that they’ll go on over the course of their marriage, but those plans can easily fall low on the priority list when raising a family. While retirement and an empty nest don’t always coincide exactly, retirement remains the main time American adults can travel most freely. This freedom naturally flows from the flexibility that retirement brings and accounts for the popularity of many cruise lines. In fact, some people go so far as to actually retire on cruise ships, according to SmartAsset.
Many people still retain a home base instead of actually living on a cruise ship, but one common theme among travel-oriented retirees is that downsizing their homes becomes a priority. This impulse is nearly the opposite of those who are interested in a family-focused retirement, highlighting a significant difference between these two approaches.
Relaxation
For a large number of Americans, retirement simply means no longer going to work while enjoying long mornings of quiet and comfort. While people with this approach may still spend plenty of time with family or go on periodic adventures, the main focus of retirement is centered around home and hobbies. For this style of retirement, “home” may come in many forms, such as a small apartment, a retirement community, or even retaining the home they lived in during their working lives.
Three Approaches to Ensure Financial Stability in Your Golden Years
Each of the above goals can influence your unique style of saving for retirement. We’ve already alluded to one of the most important decisions to make before and during retirement: where to live. Using that element as a starting point, we’re discussing several methods of retirement income strategies.
House-Rich
The description of a house-poor American family has a basis in reality, as Capital One reports on the causes of the phenomenon in which people experience difficulty affording the costs associated with owning a home. If it describes you during your working life, then you may be setting yourself up for a future in which you depend on that piece of real estate. Naturally, real estate market conditions play major roles in determining how stable this strategy is, but there are several financial approaches that take advantage of this status.
For example, a reverse mortgage on a well-designed home in a desirable neighborhood can provide regular monthly income for decades without much risk of leveraging the home. Alternatively, the home can act as a form of generational wealth as children, nieces and nephews, or grandchildren move in and help manage and tend to the home. In either case, you can turn a situation in which a high level of your income was going to pay for a mortgage into one in which that mortgage has become a stable ground for your future.
Static Financial Tools
Assets such as annuities can be an effective way to secure a stable income stream during retirement. By converting your savings into an annuity-based portfolio, you can receive regular checks that are designed to leave your core assets intact for as long as possible. These checks can also form the basis of your retirement budget, protecting other funds either for emergencies or as the core of an estate to leave to your heirs.
Dynamic Portfolios
For those who have more interest in financial literacy and are willing to take a few more risks, a dynamic approach to retirement savings may make sense. Specifically, those with good foresight and vision can identify and invest in companies that will become the “next big thing.” While this approach is certainly not for everyone, it can bring its own form of exhilaration and carry on even into retirement, becoming a kind of voluntary post-career job.
You can employ the strategies above while taking advantage of essential retirement tools, such as IRAs and 401(k)s, especially when employer funds support those programs. Once you’ve taken the time to envision your future, the road to getting there becomes much clearer.
Resource Links
“House Poor: What It Means and How to Avoid It” via Capital One
“Most Common Family Types in America” via Flowing Data
“The Costs of Spending Retirement Living on a Cruise Ship” via SmartAsset