Are you sacrificing your retirement for today’s lifestyle? If you are living paycheck to paycheck or if you are putting yourself further into debt to live a lifestyle beyond your means, your retirement may be at risk.
To make sure you live a balanced lifestyle that will last throughout your working years and into retirement, you need to constantly focus on the big picture. But many Americans tend to want instant and abundant gratification. Unfortunately, having it all now often means having a lot less later.
Look at your current debt-to-income ratio. If the amount of debt you have is greater than the income you have coming in, it is time to look closer at your lifestyle choices. If you aren’t putting money away for retirement or if you are not increasing your retirement fund contributions or debt payments every time you receive a raise in pay, you are likely living beyond your means.
Keeping expenses low allows you to save more for the future and reduce current debts more quickly. You need to look closely at your current standard of living, make sure not to inflate it and consider making potentially necessary cuts now. Instead of expanding the cost of living with wage increases and promotions – by extending vacations, purchasing new vehicles and moving into larger homes – work to maintain your current standard and look toward more investment and saving options for the future.
According to the 2018 Retirement Confidence Survey by the Employee Benefits Research Institute, only one-third of workers were very confident in their ability to pay for basic expenses in retirement. Nearly two in three workers called debt a major or minor problem; more than 40 percent said it’s impairing their ability to save for retirement. If your savings are inadequate or your debt levels are too high, you may be forced to make sacrifices. You just need to decide whether you want to make those sacrifices now or later.
Some people consciously make the decision to live a certain lifestyle now while they feel they are able to enjoy their assets, even borrowing against their retirement savings. While the concept seems harmless (enjoy things now because you may not be able to enjoy them in the future), those same people often find themselves living decades longer than they expected, struggling to not outlive what income they have left for retirement.
With advances in medicine, many people may live much longer than they expect. According to data compiled by the Social Security Administration, a man reaching age 65 today can expect to live until age 84, and a woman with the same criteria can expect to live until nearly age 87. It’s also important to note that these are averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.
Making changes to your current lifestyle so you can pursue an enjoyable retirement may be as simple as removing small luxuries such as your gym membership, cable services or beauty routines. These small, unnecessary expenses add up quickly and can take a toll on your budget. For others, adjusting your lifestyle might include larger changes, such as downgrading the type of car you drive, moving into a smaller, more affordable house or limiting vacation expenses.
Everyone lives, spends and saves differently. The ideal lifestyle for one person may not be the same for the next, and what is enjoyable and affordable during your working years may not be the same during retirement. Working with a financial advisor can help you determine if your current lifestyle is putting your retirement at risk.
Written by Securities America, Inc.