Saturday, October 8, 2011

Preparing for Retirement-Investing In Future Needs

Preparing to entire the retirement zone requires us to look at all aspects of retirement preparation. When discussing financial preparations before or after retirement, most advice centers around investments and/or downsizing options.  While both of these financial considerations are important, I would suggest that there is another use for money in retirement preparation. 

In order to have a rich and yet frugal retirement, you need to have most of what you need.  You also need to have lowered expenses,  as much as is feasible. Getting to these two place may involve some investments in things prior to retirement or at the beginning of your retirement zone.  Even if you've already retired, I would suggest it may be advantageous for you to take a slightly larger amount in the earlier years if it means lowered expenses later. Not only will some of these so called investments lower costs for you in later years, the costs themselves will be lower now.  Costs of goods rarely go down and when they do, the amount is often not significant.

Where might you invest this money? The obvious place to invest money is in our home, assuming we plan to remain there for some time. I'm not speaking of huge improvements such as additions. I am, however, talking about changes that will do one of two things-either lower our monthly and annual costs, or make our home more accessible to us later in life. Improving windows, adding ceiling or whole house fans or updating old appliances to energy saving alternatives are all examples of this. Installing grab bars, a higher toilet seat, or adjusting plumbing so that washer and dryer can be on the main floor are all small to moderate investments to make your home take you through retirement.  Will you necessarily need these changes at fifty or sixty?  Probably not.  But you'll thank yourself for them at seventy.  Not only that, but at seventy you pay for both inflation and labor, while now you may be able to invest some sweat equity.

Another home related investment may be small changes to your home to make it more comfortable to be in full time.  After all, you most likely will be spending many more hours at home-you want it to be a place that you'll be happy to spend time in.  We need to look at our homes differently when we and our significant others spend most of the time there instead of just evenings and weekends.  For some of us, this may fall under hobbies and post retirement activities.  If gardening is a passion or hobby, obviously you'll spend lots of retirement time working to make your yard and patio what you would like it to be. For folks like me, who need lots of help to get my ideal patio to a pretty, low effort place, outside help and money will be a requirement.

The basic day to day needs of life is a third place we may want to invest some cash early on in retirement (or pre retirement).  Many lifestyle bloggers and commentators observe that the reason they can manage so well in retirement is that they have most of what they will ever need. I once joked on this blog that I might never need to buy another pair of shoes again.  A comment from another blogger humorously implied that I was being a tad unrealistic.  Eventually, yes, I will need to replace shoes. But it will be done at my pace. Not only that but my replacement needs will probably be less later in retirement.  We know we will need more so called "at home" or casual clothing and less dress for success items. Pre-retirement may be the time to invest in more jeans and casual pants, sandals and the like.  Most of us have had our own households for many years.  Even so, there may be some holes in what we need to keep us going.

Note:  This is where I add that although I am certainly in favor of decluttering and making life more simple, I encourage folks on fixed incomes, lower, or retirement incomes to consider seriously before downsizing.  While we don't want things we cannot use, we need to make sure we don't eliminate a need-something that saves us money or effort.  While someone may say "I can always buy another one if I need it", that repurchased item will probably cost up to double of the original.  That's never a good thing when you're trying to be financially conservative. Consider future needs as well as current needs and space when deciding what to keep and what to throw.

If we KNOW we'll continue to pursue an interest post retirement, it MAY be worth investing in recreational equipment to use later. I'm extremely grateful that I had the foresight to purchase my really good three thousand dollar sewing machine pre- retirement. I'm not likely to give up quilting and plan to use that skill to bring in money-so its an expense that made sense. However, I as mentioned elsewhere, I would not invest in a hobby that I was just beginning to explore as a retirement interest.

Transportation is the last major way that I would suggest some pre-retirement (or early retirement spending) may make sense.  One of the "smart" ways I went through my life insurance quickly was doing things like buying a grand new, top rated Toyota Rav4 and paying cash for it. I have reliable transportation for road tripping, no car payments, and reduced insurance costs all because of this choice.

I've just mentioned a few ways that it may make sense to spend money to save money and effort in retirement.  Obviously, everyone's spending abilities and comfort level varies. In many ways, my life is the perfect example of the many people who receive life insurance or other money and promptly spend rather than save. The other side of that coin is that while I have many regrets in my spending choices, I consider some of that spending to be "investment spending" that will reward me in the long run.  Some of those expenses include a forty percent down payment on my home, paying cash for a car, investing in education for myself and my son.  Other worthwhile expenses were the purchase of a Texas worthy casual clothing wardrobe, a freezer for taking advantage of bulk cooking, the aforementioned home improvements, and other household needs improve quality of life and lower my monthly costs.  Even though these expenses mean I am looking to further savings now, those particular expenses were investments in the future.

Lastly, I would suggest again that not only will spending today's dollars save money over costs in ten years, but our ability to contribute our own labor and skills lessen inevitably as we age.  Today I am able to re tile my own bathroom, and put my own grab bars up using a drill. In fifteen years my arthritis may allow neither, and my costs in fifteen years would include not only more costly materials but the additional cost of labor.

What about you? Have you invested in things or your home in preparation for your retirement lifestyle?  Have you considered doing so?

2 comments:

  1. I've defintely thought about this. I'm only 22 though but pretty much everything you listed are great tips.

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  2. We have been delaying a necessary, substantial expense: replacing the original, single-pane windows in our 27 year old home. You can imagine how poorly they do in the Arizona heat and how much I could save in cooling and heating costs with proper windows.

    Plus, when we want to sell in the next 7-10 years they would be an absolute requirement for a buyer.

    I will have to bite the $8,000 bullet and invest in our future.

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