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Does An Active Lifestyle Affect Your Retirement Income Needs?

How do you plan to spend your golden years? If you plan to have an active lifestyle in retirement, you aren’t alone – according to studies by George Washington University, the amount of retirees who are living an active lifestyle (such as frequently traveling) has skyrocketed over the last few years. While increased vitality for seniors is a wonderful trend, it can also present some large financial problems.

What’s your retirement income and why does it matter? 

Your retirement income is the amount of income you need to maintain after retirement to live a comfortable lifestyle. This is often framed in terms of a replacement ratio – which is the percentage of your pre-retirement income needed after retirement. For instance, if your income was $100,000 per year before retiring, and you needed $70,000 a year to live comfortably in retirement, you would have a 70% replacement ratio.

The replacement ratio and your retirement income are essential keys to ensuring a comfortable retirement. For instance, if your retirement income needs are too high, you’ll end up spending all of your wealth you’ve invested for retirement, and run into big financial trouble. In addition, too high of a replacement ratio can eat away at your retirement investments, and not give them a chance to continue to grow.

How does your lifestyle affect your retirement income?

With an active retirement, there are numerous expenses that can cause your replacement ratio to skyrocket. Pricey activities like constant travel can cause your retirement income needs to be even higher than your needs before retirement. This danger of overspending is especially prevalent in the first few years of retirement, where retirees tend to be more active, and overspending has a bigger affect on their overall portfolio.

That’s why you should absolutely plan ahead to determine your lifestyle in retirement, and how it will affect your retirement income needs. Although active lifestyles can be achievable in retirement, they need to be taken into account when investing for retirement.

Need help determining your retirement income?

At LexION Capital, we individually meet with clients to carefully determine their needs in retirement, and then we create a customized investment plan based to meet any goal. We also highly encourage an active dialogue with clients to ensure any changes in their life (such as their lifestyle plans in retirement) are accounted for, and adjust their portfolios accordingly. If you would like to learn more about our retirement services, don’t hesitate to contact us today.