Boat Shopping and Retirement Savings: Do I Have Enough Money Yet?
My family and I recently returned from our annual summer trek to Minnesota, where we take time off from our busy routines and welcome a slower-paced lifestyle and plenty of relaxation. Since we stay on lakefront property, we also take advantage of water-based activities, like swimming, fishing, and boating.
Ah, boating—now that’s a great way to bond as a family! But it’s also a point of contention between my husband and me. Here’s the backstory.
We own a well-loved pontoon boat, which we’ve had for years. It’s perfect for leisurely gliding around the lake and sharing time with family while admiring the finest surroundings nature has to offer. We enjoy our time on good ol’ Jillian's Island, but as our daughter gets older and more adventurous, we’ll need a boat with a bit more umph. Right now she’s the perfect age for tubing, and if she’s up for it in the near future we might see how she does with water skiing.
Because our pontoon boat isn’t ideal for those types of watersports, we’ll definitely need a power upgrade to really take advantage of these activities. And that’s where the disagreement lies.
My husband would love a boat with all the works—mega horsepower, all the bells and whistles, christened with a snappy name painted on the hull. And this all sounds great—I’d love it, too—except those boats can cost $30K or more! I can’t quite get on board with that price.
So what does a house divided do in this situation?
Well, since buying a fancy boat right now isn’t an option (we believe in making important spending decisions together), do we “settle” and buy a less expensive boat now that will handle the watersports we want to do, but isn’t quite as nice as my husband would like? Or do we hang on to our old pontoon boat a bit longer, beef up our savings and investments a bit more, and buy that dream boat in the future?
Ultimately we’ve mutually decided to wait at least a year before seriously considering upgrading our current model. And you know, now that I think about it, my family’s boat situation is a lot like considering a retirement strategy:
Are you ready to begin enjoying retirement now, even if it means sacrificing some of the things you love to buy/do because you feel you shouldn’t spend the money at this time?
OR
Do you stick it out and work a few more years, adding to your portfolio and ideally having enough money available to maintain your current lifestyle in retirement?
Choose a Retirement Strategy
It’s very important to make sure to have enough money saved for retirement so you can continue living the lifestyle you’re used to—one where you have to make very few changes to your current spending habits.
Deciding when to retire with a financial safety net in place is a very individualized decision—and one I help my clients with often. I’ve created retirement income plans that range from modest accounts of a little less than $300,000 all the way up to multi-million dollar estates.
Ask Important Retirement Questions
Many factors determine how much is needed to retire, and the planning and management of your portfolio is often more important than the actual dollar amount of accumulated savings. And in addition to income and expenses, you need to consider inflation, liabilities, and taxes. Here are some questions I ask my clients when we begin evaluating their retirement expectations:
- How much in monthly withdrawals will you need to maintain your current lifestyle? And how might inflation affect those needs?
- How will market drops and large distributions from market-based accounts early in retirement affect a plan that’s dependent on portfolio growth?
- How will potential changes in tax laws affect your tax rate, and thus your overall savings/distribution balance?
- Have you accounted for rising healthcare costs and long-term care in your retirement needs?
Make Your Retirement Decision
So, how do you want to live your best life in retirement? Do you want the BMW of boats right now, knowing you’ll have to limit future activities due to tightened finances if you buy it? Or are you willing to hang onto your dinghy for a few more years and continue building your portfolio so you don’t have to make so many sacrifices later? (Note: “later” means for the rest of your life, so truly this decision should be weighed very carefully!)
Determining when you can retire comfortably is a tough call, but you’ll feel better about the decision when you work with an experienced financial planner. We’ve got the tools to help take the guesswork out of your future finances and the experience to go beyond the charts.
A great time to begin the planning process is usually a couple years before retirement, but even people already in retirement can benefit from the expertise of a professional.
For more examples, check out this video where I briefly explain important financial considerations before retiring.
Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance.
She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help their clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones, with less tax burden, planning makes the difference.
