After two-plus years of pandemic protocols, 2022 was the summer we finally got back to one of our great American traditions: the road trip.
Road trips can be epic or awful, unforgettable or regrettable. (We could swap stories, I’m sure.) The difference usually comes down to planning.
The same is true with the journey of retirement—which is a lot like a road trip.
Given that reality, here are six “trip tips” to help you plan your retirement journey:
- Fill your tank. The distinctive thing about your retirement road trip is that once you’re retired, you don’t usually get more chances to “fill up.” In retirement, you leave wages and salaries behind. Barring a windfall, retirement income comes from whatever wealth you’ve accumulated.
To use my road trip analogy, you need enough fuel on day one of your retirement to last until the end…no matter how long your trip is.
- Make sure your vehicle is fuel efficient. During my lifetime I’ve driven vehicles that get 10 miles per gallon and some that get 40 mpg. If you only have one tank of fuel, that makes a big difference.
In our retirement analogy, “mpg” is the amount of income your accumulated assets can produce each year. Depending on what blend of savings, investments, and insurance you choose, you may get high or low retirement “miles per gallon” out of your accumulated assets.
This is perhaps the most overlooked aspect of retirement planning. Most retirees enter retirement unaware some of these options even exist for them.
- Determine your speed of travel. In retirement, how much you spend each month is analogous to how fast you drive. The faster you drive, the lower your gas mileage will be. Slow down your driving (i.e., your spending), and your tank of fuel will last longer.
- Calculate your range. How far can you go on one tank of gas? Depends on the size of your tank and the mileage you get. A vehicle that gets 15 mpg and has a 20-gallon tank can go 300 miles. A compact car that gets 30 mpg can go 50% farther, even with a smaller, 15-gallon gas tank.
- Allow for a few side trips. Ever go on a road trip and get sent on an unexpected detour? Ever feel the impulsive urge to get off the beaten track and see the world’s largest ball of string? Unplanned side trips often make family road trips unforgettable.
Retirement involves side trips too. A spontaneous splurge, perhaps. Or major home repairs, financial assistance to a family member, or even an expensive health emergency.
You want to be sure to build in some extra margin for side trips on your retirement journey.
- Take care of your car. In 1974 my 48-year-old father bought a baby blue Mercedes Benz 450 SEL convertible for $17,000. I thought he’d lost his mind. “Dad, you’re over 40…what are you doing? Your life is nearly over!”
Well, he managed to eke out 46 more years of life. And after keeping that car for 20 years, he sold it for…$17,000!
I’m convinced someone is still driving it today. (I only wish that someone were me.)
You may not want the assets that transport you through your retirement years to disappear with you. If that’s the case, I’ve got good news. Unlike your car, your assets aren’t destined to depreciate and fall apart over time. If you take care of them, you may be able to pass them on in better shape than they were at the beginning of retirement.
With careful planning, it’s possible.
In truth, all these retirement “trip tips” take planning and coordination. Which is why I wrote my e-book How to Put Money Worries in Your Rear View Mirror – The Financial Freedom Roadmap.” Get your free copy by emailing me at firstname.lastname@example.org.
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