Five short months ago, many began the new year thinking “2020 is going to be my year!” We began with such optimism. Now many of wonder, “When will sports return?”, “When will we be able to watch new TV programming that is NOT a news show?”, “When will the COVID-19 virus end?”, and maybe “Will I ever be able to buy toilet tissue and paper towels again?”
Of course, there were things to be concerned about in the early days of 2020. This is a Presidential election year, and everyone wondered how this would affect the future? One hundred seventy-six people lost their lives when Ukraine International Airlines Flight 752 was shot down on January 8. Then there was a 7:18 AM tweet from the World Health Organization on January 14 about the new virus in Wuhan, China: “Chinese authorities have found no clear evidence of human-to-human transmission.” (January 14,7:18 AM tweet)
Since that time, the stock markets dropped nearly 30% and have rebounded approximately 15% from those lows. Social distancing is a term that has become a part of our everyday vocabulary. Many question, “How long will it be, if ever, for life to return to normal?”
Those nearing, or having just begun, their retirement years, wonder how the recent market swings affect the plans they have had in place. Will our financial nest egg last throughout our years? How much less will we have to live on with the loss in value? Will we be able to pursue our dreams and passions as we planned?
The good news for this Monday morning (always a good way to begin the week) is we may have overestimated the income needed to maintain our current standard of living. Consider these costs that will decrease as life changes gears.
- Cost of getting back and forth to work: People who drive 20 miles to work each day can expect to spend $5,000 annually on the commute. Sixty years ago, a 20 mile drive to work was unthinkable for the majority of Americans. Today, that is the norm for people just crossing town. For those living in the suburbs, the costs can be even more staggering. We spoke with someone recently who daily commutes to work in Nashville, TN from a nearby suburban city. They were shocked when they realized they were replacing tires on the work vehicle each 18 months. When we retire, we will continue to travel, but the daily cost will be lower.
- Clothing costs: There is no required dress code in retirement! While we may not embrace the idea of lounging daily in a robe and slippers, our shirts, blouses, pants, etc. will last a bit longer. We will probably be making fewer trips to the cleaners and saying goodbye to starched collars.
- Life insurance premiums: Hopefully, the needs we have for life insurance will decrease in the retirement years. With no more mortgage and minor children at home, there is a decreased need for life insurance. A family that has been paying whole life insurance can examine converting a policy(ies) to paid up insurance. This will leave a death benefit for a spouse or children but eliminate the annual premium expense.
Yes, there will be expenses in retirement. We need to plan carefully, because underestimating expenses can lead to an unhappy surprise. We need to adequately plan for food, clothing, healthcare, all the expenses of home, travel, entertainment and more. However, we should also remember to consider the costs that will decrease (those listed above are only examples).
Here is to living financially free and pursuing our passions!