Ready for retirement? Envision a lifestyle and invest accordingly

You might have read or heard that you need to replace about 80 percent of your preretirement income to maintain your standard of living in retirement. Although some research validates this guideline, consider that half of today’s retirees say their spending is higher or about the same as it was when they were working.

The idea that you could need less income in retirement considers that your income tax burden might be lower when you quit working and that you probably aren’t contributing a large chunk of your salary to retirement plans. Variables that can influence the replacement ratio — positively or negatively — include your living expenses, overall debt level, health care costs and whether or not you’ll receive an employer-provided pension.

Rather than focusing on how much money you’ll need to get by in retirement, take some time to envision a retirement lifestyle that you can really get excited about. Unless you plan to spend retirement being frugal, there’s a good chance you could need more than 80 percent of your preretirement income to fund the lifestyle you seek.

Retirement could offer the first time in your life when you’re free to travel, play golf, go back to school, focus on hobbies and pursue other interests you simply didn’t have time for during your working years.

What a disappointment it would be to retire and finally have the time, but not the money, to do as you please. If you would find it difficult to afford your ideal retirement lifestyle on your current income, it could be an indication you’re underestimating how much income you’ll need in retirement.

As we grow older, what once might have been considered a luxury can become a necessity. In their list of “basic needs,” more than half of baby boomers include an Internet connection, special occasion gifts and pet care. Many baby boomers would add family vacations, dining out, professional haircuts/coloring, movies and their children’s or grandchildren’s educations to the list of basic needs.

And for 98 percent of baby boomers, health care coverage is not a luxury, but a basic need — one they’re extremely concerned about being able to afford.

The danger of underestimating how much you expect to spend in retirement is that it could lead you to save too little or invest too conservatively during your working years. Among the 46 percent of workers who have attempted to calculate how much money they’ll need for retirement, 44 percent made changes to their retirement savings strategies as a result, with the majority of changes involving saving or investing more.

To prepare for a retirement to which you can truly look forward, consider the luxuries for which your retirement-needs calculation might not account. It could mean the difference between living well and just getting by.