"For the love of money is the root of all evil..." is a phrase taken from the Bible. When it comes to avarice, the phrase is indeed appropriate, but when it comes to retirement, money is rooted in reality: It is a necessity, plain and simple, for us to have a worry-free retirement. What may be most interesting about the relationship between retirement and money, though, is that many Boomers haven't got a good grasp on just how much money they really need to retire. In fact, some of us don't have a clue.
As reported by Richard Eisenberg for NextAvenue.org, two studies confirm that there is a gap between perception and reality. Perception: 46 percent of "late career" respondents (workers age 53 to 64) said they thought they'd spend less on housing in retirement. Reality: Only 30 percent of retirees surveyed are paying less for mortgages or rent and utilities than when they worked full-time -- and 17 percent are spending more on housing. On healthcare, the balance tips the other way. Perception: 35 percent of late career workers thought they'd spend more on healthcare insurance premiums. Reality: Only 30 percent are spending more, and 28 percent are actually spending less on healthcare insurance premiums. Of course, that doesn't include medical costs that could exceed expectations as one gets older.
As we approach retirement, Boomers are simply not all that accurate when it comes to predicting their expenses in retirement. That said, one of the best ways to predict expenses later is to manage expenses while you're working and set realistic spending targets for when you retire.
You may have to establish a budget that reflects a more modest lifestyle based on a more modest income. Social Security in combination with a draw from a retirement savings account could very well make up the majority of your income. You may find that isn't sufficient to support the lifestyle you're accustomed to -- which is why you, like many Boomers, may want to keep working. Even so, the work you can get in your later years may produce substantially less income. There really are only two ways to solve the basic problem: Generate more income or cut your expenses. Creating a realistic expense budget that accounts for your basic living expenses and includes line item contingencies for optional or unanticipated expenses will certainly help. At some point, you also may have to face some tough decisions to bring expenses in line with income and assets, such as a possible downsizing of your home.
With Boomers living so much longer, the only thing "evil" about money will be how quickly it is likely to disappear.
HappilyRewired.com is a Top 75 Baby Boomer Blog.