Four Tips for a Healthier, Wealthier Retirement

Are you, or someone you are close to, within 10-15 years of retirement? When contemplating retirement, or even if you are already retired, these four tips can lead to a healthier and more fulfilling retirement.

Tip 1: Make Some Good Friends

Having good friends and being a good friend adds years to your life! Research has shown that loneliness can damage your health as much as smoking. In fact, feeling alone might even contribute to the risk of developing dementia later in life (source: alz.org/dementia). Experts think loneliness produces an inflammatory response in the body, just like an illness might produce.

Everyone needs friends they can call in times of crisis, regardless of the time of day. If you’ve been too busy making a living to build those relationships, try volunteering, joining hobby clubs, or just reconnecting with old friends. Chances are you are not the only one in need of friends.

Tip 2: Make Memories

Behavioral finance research suggests that paying for experiences, like vacations, brings more happiness than purchasing material things. Pass on the “stuff” and build those memories with family and friends!

If your health and your budget allow you to, take the opportunity to check off some of the larger ticket items on your bucket list. Putting off everything until retirement can be a recipe for disappointment. Health issues, family troubles, and even your lack of stamina can upset active retirement plans.

Tip 3: Check Your Spending

Everyone worries about the size of their retirement savings and whether they will have enough “income” during retirement. A sure-fire approach for stretching your retirement money is to eliminate your debt. Before taking the big step of retiring, pay off credit cards, reduce outstanding medical bills, and do the best you can to reduce/pay down your mortgage.

While cutting expenses is important, setting yourself up with a monthly paycheck is also vital. One conservative approach is to only use the income and investment gains from your retirement portfolio, without dipping into your principal. You may need a full-service broker to help you set this up.

Another general rule of thumb is the “4% Rule.” With that approach you withdraw no more than 4% of your savings the first year in retirement, and then adjust that dollar amount annually for inflation. Historically, this method has worked well.

Tip 4: Be a Smart Investor

When thinking about investment allocations (how much of your money is in stocks vs. bonds) you need to consider your age, your total investment picture, and your individual tolerance for volatility. You may need a certified financial planner, a financial advisor, or a financial educator to help you, depending on your individual situation. Once you have arrived at a model asset allocation, check your account to see how closely your account aligns with the model. With US stocks up nearly 22% (more than double the historical average) chances are your stock allocation is larger than your model allocation. You might need to rebalance.

Experts at Vanguard think that over the next 10 years US stocks will gain 3-5% annually and bonds will return from 2.5-3.5%. They are not expecting the historically high returns of the last 10 years to continue. You need to get a plan, whether it’s a portfolio of individual mutual funds or the age appropriate Target Date fund, and stick with it.

In addition, keep an eye on investment costs. Over long periods of time, say 30 years in retirement, even a slight reduction of half a percent can significantly impact the size of your retirement savings and ultimately your retirement lifestyle!

Just remember, retirement is not a date on the calendar, but a stage in life that will hopefully last for decades! Think of it as a work in progress. You can always adjust and improve your finances to give yourself the retirement you’ve always wanted.