As part of an IHT special on net worth (18 May 10), which I read while on holiday in Thailand, Anne Bagamery recommended five check points on “How to Retire Comfortably”
- Choose your venue wisely. Where you are living when you retire need not be where you end up, but moving gets harder as time goes on. If you move to reduce costs, factor all of them in: Low property prices may not make up for high health-care costs, rising property taxes or travel expenses to see family.
- Know your benefits. Many pre-retirees have an outdated idea of how much they’ll have in pension income and how much health care will cost. But laws and policies change, generally not to the benefit of retirees. Sit down at least a year in advance with a benefits expert and get the correct, up-to-date information.
- Have a cushion handy. The best insurance against rising costs is to have liquid assets set aside to throw off income or draw down in an emergency. Salt away as much as you can in the years leading up to retirement. Do not count on being able to sell illiquid assets, like real estate, in an emergency, as the market may be against you just when you need it most.
- Lowball your budget. Living below your means is the best way to ensure that you do not outlive your money. Even if your pension is lower than your final salary, aim to keep monthly expenses at least 25 percent below your monthly fixed income, at least at first. Bank the rest to add to your cushion (see above).
- Stay out of debt. Paying interest, otherwise known as rent on money, is a bad idea when you are earning a salary. On a fixed income, it is positively foolish. Before you retire, pay off credit cards and other consumer debt. Once retired, don’t take on any more unless you can pay it off easily each month.
No.s 2, 3, 4 and 5—Check.
No. 1—Hmmm. Where is the best place for us to be in retirement? Right where we are seems OK for now.