When you start out in your career, you're probably not thinking much about retirement. At this point, your picture of a "retirement lifestyle" may be, at best, hazy, hidden as it is behind a veil of experiences you've yet to encounter. But as you move through the years, your view of retirement comes into clearer and closer focus — and this vision will have a big impact on your savings and investment strategies.
Consequently, to create and implement those strategies effectively, you'll need to define your retirement vision by identifying its various parts. Here are some to consider:
• Travel. If you're like many people, you may dream of traveling during your retirement. But what does "travel" mean to you? Do you envision taking a cruise or an international trip every year? Or is your idea of travel just a short jaunt to a popular destination, such as a lake or the mountains or the beach? The difference in costs between global and U.S.-based travel can be enormous, so you'll need to define your goals and estimate your expenses.
• Second home. Once you retire, you'll have to make some housing-related decisions. Should you sell your home and "downsize?" Or do you want to keep your current residence and possibly purchase a second home, such as a condominium, in another part of the country? Obviously, you'll need to factor in these choices when you think about how to invest before you retire and how to manage your withdrawals from your 401(k), IRA and other accounts during your retirement.
• Volunteer activities. You might think that your volunteer activities during retirement won't affect your finances much. But if you are particularly ambitious, and your volunteerism involves travel, renting space, purchasing equipment and so on, you might be looking at some large cash outlays. Furthermore, if you host people at your house, you may be incurring some types of liability risk, which you might need to address through appropriate insurance coverage.
• Hobbies. During your working years, you may pursue your hobbies always with the thought that you can devote a lot more time to them after you retire. However, expanded hobby activities may involve expanded costs. For example, if you're good with cars, you might decide to invest in that foreign sports car of which you've dreamed. Or, if you're fascinated by genealogy, perhaps you'll start traveling to places once inhabited by your ancestors. These types of activities can be expensive, so you'll have to evaluate your saving, spending and investing habits to determine how to accommodate your increased expenditures on your hobbies.
• Second career. Many people look forward to retiring from one career so they can start another — opening a small business, consulting or even taking a part-time job. Clearly, if you were to start your own business, some expenses would be involved, so you'll have to plan for them. Even if you become a consultant or work part time, you could incur various costs, including travel. And, in relation to these types of work, you may also have insurance and health care issues to address.
By identifying the various components of your retirement vision, and estimating their respective costs, you can make those saving, spending and investment choices that can help you work toward your retirement dream.
It’s unfortunate, but true: The elderly population may be the most vulnerable group in our society. In fact, in an effort to call attention to the problems of physical, emotional and financial abuse of the elderly, the United Nations has designated June 15 as World Elder Abuse Awareness Day. If you have older parents, or even grandparents, can you do to anything to help prevent them from being victimized, especially with regard to their finances?
Actually, there’s a lot you can do. First and foremost, you need to maintain good communications and a trusting relationship with your older family members. As long as these elements are present, you should feel free to make the following suggestions:
Increase awareness — When it comes to financial fraud and scams, many seniors think: “It can’t happen to me.” But the facts suggest otherwise: Some 20 percent of Americans over the age of 65 admit to having been victimized by financial swindles, according to a survey by the non-profit Investor Protection Trust. Let your loved ones know that no one in their age group is immune to financial predators.
Guard private information — Ask your parents or grandparents to not divulge personal information over the phone. In fact, urge them to get caller ID, if they don’t have it already, and tell them that if they don’t recognize the number, don’t answer. Legitimate callers are more likely to leave messages than scammers.
Don’t send money. Exhort your parents or grandparents to never wire money to a random account — no exceptions.
Ignore “limited-time offers” — Your loved ones should ignore callers, mailers or emails that demand they act immediately. These offers are often overblown at best and may be fraudulent at worst.
Don’t trust “no risk” offers — Financial offers that sound too good to be true are likely just that — untrue. Legitimate investments carry both potential risks and rewards.
Avoid “debt-settlement” claims — If your older loved ones have debt problems, they may be especially susceptible to offers that claim to “clear up” all their debts. But there’s no quick fix to this problem and any caller who claims otherwise is likely being deceitful. Encourage your parents or grandparents to discuss their debt situation with an honest, professional debt counselor or a financial advisor.
Here’s one more thing you can do to help your parents or grandparents avoid financial fraud: If they don’t already work with a trusted, qualified financial professional, introduce them to one. If your parents have a relationship with such a professional, they will be less likely to listen to any questionable, unsolicited offers than if they were trying to manage their finances on their own.
You’re in a good position to know how much, or how little, help your elderly loved ones may need in terms of avoiding financial abuse. So be willing to do whatever it takes to help them enjoy their retirement years comfortably.