Many people carry their retirement concepts around
in their heads.
They may imagine a luxurious recreational vehicle
parked near a Florida theme park. Rounds of golf. Boating. Shopping.
Taking a creative writing class. Gardening. Who wouldn't look forward
to such a future?
Smell that coffee? Retiree wannabes need to indulge
in some serious reality tweaking or their dreams will hit the wall
faster than a roller derby queen on a greased track.
If you crave the rush that comes from having to cash
in beer bottles to pay your mortgage, then here are a few strategies
guaranteed to turn your retirement into one memorable financial
catastrophe after another.
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Buy more home than you can afford
No time like retirement to grab that McMansion you've always wanted. By opting for a house that'll turn into an albatross in the face of climbing property taxes and soaring insurance premiums, you can ensure your home will become a real burden in your old age. Another instant path to bag lady-hood: escalating maintenance and upkeep.
Dave Ramsey, personal finance expert and talk radio
host, says to temper wants with needs. He said he read a recent
poll in which 80 percent of Americans said they believed their standard
of living will go up at retirement. "Our culture today tells
us that we deserve to have everything we want because we can charge
it. Previous generations thought you could only have something if
you could pay for it. Their lifestyles were much simpler and retirement
was a time to simplify even more," Ramsey says.
Do it right: Pay off your
bills, including your home if you can afford to do so, before retiring.
If you have
to move -- or simply want to -- don't buy something you can't
afford in the long term. And minimize repairs by keeping up with
Base your projected cost of living on today's expenses
You calculated your cost of living against your projected retirement income and things look pretty darned rosy. Chances are you didn't factor nasty old inflation into your budget.
Assuming an inflation rate of 2.2 percent that rises
to 3 percent starting in 2017, what costs $10,000 in 2008 will go
for $12,528 by 2018. In 2028, that figure will rise to $16,837.
And in 2038, you'll need $22,628 for the same expenditure. If 2038
sounds like "Star Trek" and beyond, look at it this way:
If you retire at the age of 55 in 2008, you will be 65 in 2018,
75 in 2028 and 85 in 2038.