Each day brings new challenges that threaten us, and the Internet often resembles an enormous social megaphone with the volume cranked all the way up. So it's understandably hard to square this persistent outpouring of threats and unhappiness with the reality that the inhabitants of planet earth are living longer than ever before and inflicting less physical violence on one another. What if, God forbid, these turn out to be the best of times?
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So it is with the torrent of negative retirement news. Bad as things often look, people will continue to retire, and many of them will enjoy terrific lives in their later years. They will join millions of other Americans who have managed to do the same. What are their secrets? Here, culled from research studies and retirement experts, are 10 essentials for a successful retirement.
1. Planning. Successful retirements rarely happen by accident. They require planning, and it should begin well before retirement begins. Younger people do not need to have any detailed plan for their later years. Heck, many probably don't know what they'll be doing next year. But they should set up tax-favored retirement investments, contribute enough to trigger the top employer match, and place their money in stable and safe investments. Older people should begin in their 50s to ask questions about the adequacy of their retirement funds. They also should attack some of the big retirement issues: where they want to live, how they want to spend their time, and the like. At whatever age retirement becomes financially viable or physically necessary, they should have a more detailed plan and ways to achieve it.
2. Budgeting. Most people overestimate their retirement income and underestimate their retirement expenses. Well before the regular paychecks stop, many successful retirees will have taken a hard-nosed look at their retirement income and expense needs. Expense budgeting is crucial. Once the income and expense sides of your personal ledger have been completed, you can see if there's a gap that needs to be closed. Most likely, it will be closed by trimming expenses. Many experts say it's a good idea to look at your locked-in sources of retirement incomeâ€"Social Security and traditional pensionsâ€"and match this amount to your fixed expenses: mortgage, utilities, insurance, fixed debt payments, operating expenses for your car, and basic household costs for food and other necessities. Then, look at the likely income stream from your investments and use those funds for discretionary spending on vacations, restaurants, and the like. This way, if r eturns on your investments don't fare as well as you thought, you won't have to eat into your investment accounts to pay expenses. When markets recover, you can resume your spending.
3. Homework. Retirement is many things, but a life of leisure usually must be preceded by a lot of homework. This is particularly true when it comes to healthcare costs. The average 65-year-old couple will spend more than $250,000 on out-of-pocket healthcare during the rest of their livesâ€"the single largest unknown expense for most people. Medicare was complicated enough before health reform was enacted. Now that the U.S. Supreme Court has upheld the law, anyone planning to retire in the next several years should spend time understanding how it will affect them. Other questions you should answer include: how healthy is the economy of the area you're thinking of choosing for your retirement home; what are the state and local tax rates in that area; what are state estate taxes like; do you have a good approach to spending down your assets in retirement, and what is the best strategy for you about when to begin claiming Social Security benefit s?
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4. Realism. None of the planning, budgeting, and homework you do will provide the basis for a successful retirement unless you're realistic in your assessments and assumptions. Most people, for example, actually retire several years before they earlier said they would. Likewise, they say they will continue to work well past their 65th birthday. Careers do seem to be trending longer since the recession, but there is still a mismatch between plans and actions. Be honest with yourself.
5. Balance. The key to a lot of good things in life is a sense of balance. Successful retirements involve a good balance between expectations and reality. This doesn't mean sacrificing your dreams. It does mean road-testing your dreams to see what it would take to make them possible.
6. Health. No surprise here. Good health is the "knock on wood" wish of every retiree. What's different today than a generation ago is the widespread recognition that good health is no accident, but the probable result of good diet and exercise habits. These habits need to start now, not when you're 70 (although it's never too late to begin). It's been proven that strenuous exercise, with heavy weights and sweat-inducing cardiovascular workouts, can help even people in their 80s and 90s. Investing in good health is as important as socking money away in retirement accounts.
7. Family and friends. As people look forward to their later years, the priorities that loom largest tend to be people, not possessions or unshared travel experiences. As with your health, good relations with friends and family members need to be developed and nurtured over time. If there are people you know you want to spend time with when you're retired, figure out what you need to do today to enhance the odds that you will have the strong bonds you desire in the future. Having honest conversations with children is crucial, especially when it comes to issues surrounding grandchildren. Maybe you want to live close to grandchildren and see them a lot. Do your kids feel the same way? Do they expect you to be constantly on call to be free babysitters? How would you feel about that? Do you expect your kids to be constantly on call to help you out with household chores and errands? Make sure you're all on the same page before taking important act ions you might later regret.
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8. Socialization. Loneliness is a killer for older people. This is especially true for men, who are seen in surveys to have a harder time than women making friends, and tend not to ask for help or reach out to loved ones. If you don't have a rich circle of family and friends, and aren't likely to build one before retirement, perhaps a senior community makes sense. Even if you don't need help due to physical ailments, you might need the structured support that a retirement community can offer. Don't be in denial on this one. Looking through scrapbooks of old family pictures gets, well, old after a while.
9. Legacy. People who are happy in retirement have frequently taken care of major life decisions rather than leaving them to some future date. Uncertainty is stressful, and stress should not be a sought-after condition at any stage in life and especially not in retirement. Questions about passing on wealth and possessions should be decided when you're healthy, and should be discussed with family members and other loved ones. Maybe your daughter doesn't really want your wedding china. That doesn't mean she's a bad person. Maybe you think leaving college money for grandchildren is a great idea. But you should discuss it with your kids. If you trust your children, perhaps they should control these funds. Where do you want to be buried when you die, or do you even want to be buried? If you're married, do you and your spouse agree on these matters? These are discussions you should have.
10. Acceptance. With due apologies for being presumptuous, let me suggest that we all have made many, many mistakes by the time we retire. Often, the people we'd view as the most successful are the hardest on themselves as they approach and enter retirement. Maybe it's workplace failures. Or personal relationships. Often, it's the quality of parenting. Whatever it may be, carrying this baggage around with you during retirement is a heavy, heavy burden. It's nearly impossible to win the blame game. And if you also play the comparison game, you can always find someone who did things better than you. You may need professional help with this, but forgiving yourself for being human can be a liberating act as you approach retirement and your later years.
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