6 Steps to a Satisfied Retirement

Discipline bears fruit over time when discussing the retirement savings. But if you’re like many people who are still working but are closing in on retirement, there is still hope for a happy retirement. A recent Consumer Reports Retirement Survey, of more than 24,000 online subscribers, found 6 steps that work to obtaining a satisfied retirement.

  1. Live Modestly

    This was the top “best step” listed by retirees who said they were highly satisfied with their lives; 39 percent said they did not spend beyond their means. One way to rein in spending is to create a budget using store-bought software such as Quicken or a free online service such as BudgetPulse (https://www.budgetpulse.com/). Those programs help you track your spending and your progress toward meeting saving goals by consolidating your financial data from banks, credit-card companies, and brokerages.

  2. Maximize your savings

    Even if you don’t have a defined-benefit plan, regularly contributing to a 401(k), 403(b), IRA, or other investment vehicle pays off, our satisfied retirees told us. (Saving too little was a regret of 27 percent of dissatisfied retirees.) At 50 and older, you can put as much as $22,000 into a tax-deferred, traditional 401(k) plan or after-tax Roth 401(k) or their 403(b) equivalents in 2010.

  3. Reduce debt

    Thirty-eight percent of retirees owed $25,000 or more on their mortgages. But 74 percent of retired respondents who were free of major debt reported being highly satisfied with their retirement. For greater peace of mind, pay off your debts before retiring. Even a low-rate mortgage can be a burden if other expenses rise and your income-producing assets falter. Notably, debt-free retirees had a higher median net worth than those with debt: $843,000 compared with $717,000.

    In the current economic environment, accelerating payment of your mortgage can be a wise investment. Most certificates of deposit, bank accounts, and other safe savings vehicles are paying less than 2 percent, so putting your money into additional payments on a 5 percent mortgage instead offers a better return (though you’ll give up some tax deductions on mortgage interest). By making extra principal payments, you can whittle down your loan’s interest cost and term handsomely. For example, adding $100 per month to payments on a 30-year, $150,000 mortgage with a fixed rate of 5 percent reduces the total interest by almost $35,000 and cuts the loan’s term by 6Β½ years.

    I agree on this one! My husband and I participate in an accelerated mortgage program. Not only is it nice to make our mortgage payments weekly and the life of the loan is reduced significantly, but we’ll also save over $40,000 in interest!

  4. Don’t invest too conservatively

    Taking on even a moderate amount of risk pays off. Median net worth for retirees who said they took a middle-of-the-road approach was $836,000 vs. $671,000 for conservative investors. Notably, the difference in net worth between self-described moderate and aggressive investors was relatively small: a $57,000 advantage for the more aggressive. The lesson: You don’t have to go out on a limb to get the best return. Diversification will help reduce your risk.

    I will have to let my husband know the results of this one. Being so close to retirement, he believes in investing agressively to play catch up on the missed years. With a relatively small advantage I don’t think it is worth it. I fear there would be potentially much more to lose if their was another crash. What’s your thought on this one?

  5. Study your options

    When you design your dream retirement, also devise a Plan B in case you’re forced to retire early or can’t sell your home (a predicament of 8 percent of surveyed retirees). Your alternative plan might include a more restrictive budget or a different retirement location. To determine your Social Security benefits at different ages, go to www.ssa.gov.

    A major issue will be health-care coverage. You can move to your spouse’s insurance plan, find a new job with health benefits, extend your own employee coverage under the COBRA law (go to www.dol.gov and type “cobra” in the search box for details), or look for private health insurance. If you go that last route, try to get group coverage through professional or other membership associations.

    What about becoming an expat for Plan B? I heard their are some nice places to live on way less money. Anyone have experience with obtaining healthcare as an expat?

  6. Take the intangibles seriously

    Stress affected overall satisfaction in retirement even more directly than net worth, our survey found. A quarter of retirees cited nonmonetary stresses such as family relations, poor health, a loss of identity, and boredom. So before you retire, develop hobbies and line up volunteer work, trips, or part-time jobs. Strengthen your personal connections outside the workplace. And, of course, do what you can to maintain good health.

    I agree on finding a hobby before retirement. I have seen too many people get bored. But I have also seen people enjoying their retirement thru volunteering.

Retirement planning is not solely based on a person’s financial net worth. The survey found a happy retirement was about the same between those with a net worth of $500,000 and $1 million. Having more than $1 million did not make a notable difference in their level of happiness either. And if your net worth at retirement will be lower than $500,000… or even lower than $250,000, more than 50% of retired individuals were still statisfied with their retirement.

Are you ready for retirement? Just in case, do you have a plan B?

(photo credit: Mississippi Family Law)

18 thoughts on “6 Steps to a Satisfied Retirement

  1. LoveBeingRetired

    Good points addressing the financial side of retirement and your #6 is equally important to plan for prior to exiting the working world. What you will do with your time while retired will be a huge factor in your level of satisfaction. Focusing on a passion that you may have had to ignore while working is a good way to go, whether it be painting, learning an instrument, biking around the state, or learning a new language. Once retired, you have the time to do what you want so just do it!

    1. Money Funk

      I have this huge list of things I want to learn now. And if I don’t get to them I am going to be darn to let them slip thru during my retirement years. I have this idea of opening a B&B during the summer years in my retirement. And then make for a quiet winter to enjoy with my family.

      I think being around friends is important while doing all those great things, too!

  2. Forest

    I am hell bent on not having any debt in retirement. I don’t know how I will fare with investments but I know I am good at living below my means these days so modesty is no issue….

    1. Money Funk

      I am with you on this one, Forest. I don’t know that I will be set with a substantial investment portfolio at retirement, but if I am debt free I can fair too. And I think most of PF bloggers don’t have an issue with living modestly. We should be pros at it now. πŸ™‚

  3. Jenna

    Since I’m a recent college graduate, I’m definitely not ready to retire! However, I’m hoping to take the right steps now so that when I am ready to retire I will bea able too!

    1. Money Funk

      Jenna, don’t wait. Start now! Every little penny helps. I put away 10% of my son’s allowance. And he just doesn’t get it. That is more money for him to spend now. But if he leaves it alone when he gets old enough… he’ll thank me. If not, he’ll by giving himself a headsmack and telling himself that mom was right. *Well, I can only hope for it. πŸ˜‰

  4. Financial Samurai

    Ahhh, the dreams of a wonderful retirement include 3 hours working online, 2 hours of tennis, 2 hours of surfing, eating a wonderful meal, and watching a great movie in the evenings.

    1. Money Funk

      Sounds wonderful. Then again, I feel this hardship about leaving my current career to live this sort of life. I don’t quite understand it. Yes, I like my career, but a life above would be wonderful! Maybe I feel the pull to stay because I have full medical, a solid salary… there is not much risk involve. Crazy to say, I would leap to the chance in my youth. Now its about taking calculated risks. However, given the time to live the life scenerio above… I am sure withdrawl symptoms from leaving the career would be short. πŸ˜‰

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  7. Doni

    if you can do it the best way to save is to pay down your mortgage down early. or for that matter your car loan as well. so many people try to make the minimum payments if they just switched there train of thought paid slightly more they would be leaps and bounds ahead of the game.

    1. Money Funk Post author

      isn’t that the truth. I just paid off my car loan and saved a tons on interest. We are doing the same for the house, too! We will save approximately $40,000/interest with our accelerated payments and 10-15 years, too. πŸ™‚ Doni, thanks for your comment. It really does help emotionally & financially to switch the train of thought!

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  9. Larry Harnar

    I think the best step you can make for retirement is to minimize your expenses. Get rid of everything extra that you really don’t need. We aren’t quite retired yet, but we’ve cut our monthly fixed expenses down to less than $800 a month. That makes it much easier to plan for income wise, and gets rid of a lot of the stress that we used to feel.

  10. Gmac

    These are great tips. As for investing; it’s better to invest aggressively when you are younger (stocks and such) and more conservatively as you get older. It’s best to start off young because you will have time on your side. I also don’t think that owning a house is for everyone. If you plan to stay single and don’t have kids it’s also perfectly fine to retire living in an apartment, especially if you live somewhere expensive like in Southern California.

  11. Tory Ester

    Just a small smiler to spread the good words and thank you for your great site

    I’m a nobody, nobody is perfect, therefore I’m perfect. πŸ™‚

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