Even though $5 million is a significant sum, having a nest egg that size for retirement still requires that it be handled in a prudent manner. Here are several ways to make sure that such an amount covers your wants as well as needs after you’ve stopped the 9-to-5 routine. One of the wisest moves you can make to ensure that you can do what you want in retirement is to work with a financial advisor in developing a retirement roadmap to guide you for the two or three decades you’ll be drawing on that nest egg.
Step One is making a plan. That’s something many retirees, including wealthy ones, don’t do. According to Northwestern Mutual’s 2020 Planning & Progress Study, nearly half (40%) of U.S. adults don’t have a clear idea of their current spending limits now versus what their spending limits will be later. They are unsure of where to draw the line so that they can save for later. As a result, 27% report holding back while another 22% spend without knowing and hope they still have enough. The study also found that 71% of Americans feel that their financial plan could use improvement, but only 29% work with an advisor.
Creating a financial plan starts with creating a retirement budget. That can reveal if your $5,000,000 can cover the type of lifestyle you plan to enjoy for the next 20 or 30 years. The budget should account for basic living expenses including housing, food, utilities and transportation, as well as healthcare, hobbies and travel. If you have no idea where to begin, review your current spending patterns.
Try tracking your spending for at least six months and then ask yourself some key questions, such as:
Is what you’re spending now likely similar to what you’ll spend in retirement?
Are there any expenses you have now that may increase or decrease when you retire? Any that could disappear altogether?
Are there expense categories you don’t have now that you might add to your budget when you retire?
These questions will provide…
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