Balancing act

Many retirees can enjoy the hard-earned fruits of their labor without sacrificing their financial security.

Balancing budget and money

A common fear I’ve seen among pre-retirees is not having enough money to get through the retirement years comfortably.

While this anxiety is common, I’ve also come to find that many pre-retirees — who have saved enough for their golden years — choose to live below their means.

Don’t get me wrong. Frugality plays a key role in personal-financial success. However, with the right proactive planning, many retirees can enjoy the hard-earned fruits of their labor without sacrificing their financial security.

When I sit down with someone who is five to 10 years from retiring, I take them through a process that helps ensure they have their basic expenses and sources of income identified for their retirement years. But I also evaluate their retirement wish list — whether it’s a cabin, a boat or traveling the world — and create a realistic plan to help achieve each goal.

After all, you’ve spent decades saving for your retirement; you deserve to enjoy it!

Here are the steps you can take to help create a plan that protects your financial security while also giving you the flexibility to live greatly during your golden years.

Evaluate expenses

No matter what kind of retirement dreams you have (big or small), it’s crucial that you understand — and don’t underestimate — your expenses.

A common misconception among many Americans is that their expenses will decrease once they quit working. Yes, you may pay off your mortgage by retirement and maybe your transportation costs will drop as well (many retirees find they need only one car since they no longer commute to work daily), but costs such as health care, taxes and leisure will likely increase.

While it can be difficult to come up with an exact number for your expenses, it’s crucial that you plan in advance to at least get a ballpark estimate so you can better understand your financial situation before those regular paychecks stop.

Assess income

The next best step is to identify your various sources of income so that you have a full understanding of where, when and just how much money you’ll have coming into your accounts. Along with Social Security, pensions and savings like a 401(k) or IRA, you’ll also want to take into account investment income you may have.

Other sources of income may include rental properties, annuities or insurance, part-time work and even an inheritance. It’s also important to plan for the potential timing of these various sources of income.

This includes determining the best age to start drawing your Social Security benefits and taking your required minimum distributions from your retirement accounts. Creating a strategic income plan for your retirement years can not only help ensure your expenses are covered, but also help you avoid unnecessary taxes and penalties that could hurt your savings.

Create your bucket list

Now comes the fun part. What are your retirement dreams?

Aside from the average day-to-day lifestyle you plan to live, what else do you hope to do once you’re done working? Perhaps you envision yourself at the nearby lake, so your dream may consist of  purchasing a cabin or buying a boat.

Maybe you see yourself traveling the country to visit all your grandchildren or traveling internationally to see the world. Identifying your retirement dreams now can help them become
a reality later in life.

And budget again

Now that you know how you want to spend your retirement years, it’s time to figure just how much money it will cost you. Items like a boat or cabin are fairly easy to estimate while a travel budget may take a bit more research to determine.

Once you have an idea how much your retirement dreams will cost you, it’s time to cross-reference them with your budget. Keeping your expenses and income in mind, you should have a pretty good idea just how much flexibility you have to spend on your bucket list.

After spending 30 to 40 years of your life saving your retirement, it may feel odd adjusting to the idea that you can now enjoy some of that money you worked so hard to set aside.

And while your basic needs and expenses should always be prioritized, it’s also important to realize that memories built during your retirement will hold more value than your bank account. It’s your choice to live greatly!

Skip Johnson is an advisor and partner at Great Waters Financial, a financial-planning firm and insurance agency with five Minnesota locations. Learn more at