Retirement is often seen as a time to relax and enjoy the fruits of your labor, but the fear of running out of money can overshadow this period.
That’s why we’re discussing some of the things that can wreck a retirement if not planned for carefully in this three-part series “How Much is Enough?” – including budgeting for hobbies, questions you should ask if you’re thinking about downsizing, and protecting yourself from large medical expenses.
Let’s start with the fun stuff – hobbies. One of the most effective ways to combat this fear is to plan your retirement lifestyle meticulously. Even those who are conscientiously putting money away for retirement might not be putting together the entire retirement puzzle; after all, if you don’t know what you’re saving for, how can you know if you have enough?
According to Investopedia, some of the most common things that retirees spend money on are travel, recreational vehicles, and vacation homes. But there can be a vast savings difference within those interests:
- The amount you budget for travel in retirement will depend on your retirement income and where (and how) you'd like to travel. Budgeting between $10,000 and $50,000 for retirement travel annually is one way to estimate your costs.
- According to the RV Industry Association, a Class A motorhome can cost from $100,000 to $140,000. Camper Vans, also known as Class B, cost between $95,000 and $135,000, and Class C motorhomes range from $80,000 to $120,000. Customizations can increase the cost even more.
- In 2022 (latest information), a vacation home was worth approximately $465,000. According to the U.S. Census Bureau, a manufactured home cost about $120,000 in 2023.
Let’s talk about how you can still enjoy your retirement…without worrying your fun will bankrupt you.
Explore Your Interests Now
Start by exploring potential hobbies and interests before you retire. Whether it's traveling, gardening, painting, or golfing, engaging in these activities now can give you a clear idea of what you enjoy and how much they cost.
Create a Detailed Budget
Once you've identified your hobbies, create a detailed budget. Track your current spending on these activities and project them into your retirement years. Remember to factor in potential increases due to inflation or additional free time you'll have. Your financial planner can help you with that projection.
Consider the Costs of New Hobbies
Retirement might be the perfect time to start new hobbies. Research the costs associated with any new activities you plan to take up. Joining clubs, purchasing equipment, or taking classes can add up, so it's crucial to include these expenses in your retirement budget.
Plan for Occasional Splurges
It's essential to account for occasional splurges. Whether it's a dream vacation or an expensive hobby-related purchase, planning for these one-off expenses can prevent unexpected financial strain.
Reevaluate Regularly
Your interests and hobbies may change over time. Reevaluate your hobbies and associated costs regularly to ensure your budget remains accurate and reflects your current lifestyle.
Also, keep in mind that there might be ways to earn money ON your hobbies! This article, How to Make Money in Retirement: A Guide to Turning a Hobby Into a Side Business, has some interesting ideas on how to monetize your interests.
As with everything related to retirement planning, the most important thing is to…well…plan. Even if you feel like you’re hitting all your savings goals, you really don’t know until you better understand yourself, your interests, and the money it will take to keep you happy.
Need someone to help you run those numbers? I’m here to help. CLICK HERE to make an appointment.