By Catherine Allen, Contributor From Business Insider

Most financial advisers and articles on financial planning for retirement start with the topic of the right number for you to save for your next chapter in life.

Often they cite having six to eight times your current salary, and they recommend you only take out 3-4% of current liquid savings each year on which to live. They ask you to estimate your current expenditures and discount it by 20% or so to predict your spending needs in retirement.

I think maybe they, and we, are asking the wrong question.

We have learned two key things from talking to people who have retired, or are about to: First, they are trying to better plan for funding needs by decade rather than in a lump sum and, second, to focus on revenue still coming into the household at least through their 60s and 70s. The point is to still bring in income to supplement retirement funds and fund the lifestyle you want.

We should be focused on lifestyle desires, likely longevity of yourself and spouse or partner, and types of expenditures by decade. The real number might be a combination of 10-12 times your current income plus revenue coming in at least during your 60s and 70s, beyond savings.

Sounds daunting, but it’s not if you keep focused on the bringing in revenue side of the equation.

For example, if you are making $75,000 a year, using the 10-12 ratio, you should have $750,000 to $900,000 in savings, social security, and pension income, plus have ways to continue to bring in income. It sounds like a lot, but do a calculation of the value of your pensions and Social Security to add to your savings number and it is obtainable.

Here’s why that number needs to be larger than you might think: Our needs change in retirement … in our 50s, 60s, and 70s. The Boomers are proving to be young at heart, fit, and excited about this next chapter where they have more free time to travel and be with family, as well as engage in hobbies and other for-profit or non-profit activities.  In fact, many Boomers (over 57% by the latest USA Today survey) are staying in the workforce, some full time and others part time, because they want to stay relevant, give back, and shore up their savings to maintain a more active lifestyle.

The 60s

For example, many retirees spend more in the first decade after they retire because they now have the time to travel, they want to be close to family, they have more time to go out with friends, and they want to continue the lifestyle they had before retirement. They are healthy and want to make the most of their time to travel with loved ones … especially to foreign places, on planned trips, and even to volunteer. They may have sold their family house in the suburbs, but they might have bought a destination vacation home for their family and grandkids as well as a pied-a-terre in the city for their own cultural interests. Their costs and standard of living might well go up. They are still big consumers, but the goods and services desired have changed.

The 70s and 80s

However, by the late 70s and early 80s, most retirees are spending time closer to home with family and friends.  Maybe they take a planned tour or cruise once or twice a year, but their interests have changed and are more locally focused. During this period, many are thinking about philanthropy — not that they have not been giving before, but this is the period of significant gifts to universities, charities, and even their children. It is also a period of de-acquisitioning: getting rid of stuff, and maybe downsizing to apartments or even retirement communities. 

The 90s … and 100s

Then the late 80s to 100-plus (yes, many of the Boomers will be living beyond 100) becomes a time when health issues become predominant and expenditures shift towards supplementing Medicare and health insurance. Many move at this point to a relative’s home or assisted living. One scary AARP statistic is that a couple from the age 65 until death will spend an average of $266,000 beyond Medicare and insurance coverage on health-related expenses. It’s why we are proponents of long term care insurance, especially if you are a woman, or living alone.

Focusing on funding by decade helps you to think about, and plan for, the kinds of things you envision doing during those time periods — to plan out well large purchases, such as houses, and to decide what kind of travel, and how, you want to do. It also means thinking ahead about giving to your favorite non-profits, charities, or even to your family members. By planning, and saving, for specific periods of time and events, you will be better equipped to weather out the unexpected events. For example, if you are planning to stay in your home for your 60s and 70s, do you really think it will fit your needs in your 80s and 90s?  If not, the sale of that asset might fund the next twenty years while you live in an apartment or retirement community.

Travel now, while you are healthy and can stand rigorous walks, and plan to take a cruise once a year once you hit 80 … again, lowering the need for travel funds in those next two decades. Many universities have annuity programs that pay you back each year from the principal you donated, which is a way to save on taxes, as well. The point is that your funding needs will change with age and changed interests, so plan with that perspective.

So how can you continue to bring in revenue? 

• Continue to work full or part-time at your current position until your late 60s or early 70s, if possible.
• Find a part-time position in another company or industry.
• Become a consultant or interim executive with a company.
• Look for opportunities in health care, financial services, education, tourism, and consulting, as those fields are less likely to discriminate based on age.
• Turn a hobby, such as photography or baking, into a part-time income.
• Trade out expertise, such as cooking classes or lecturing on how to do something, for cruises and other travel tour opportunities.
• Rent or trade your home when you are away.
• Rent a room in your home or do Airbnb.
• Become a concierge, personal shopper, Uber driver, handyperson … anything to bring in a little income and keep you occupied.
• Barter what you do well for other things or services you need.

Two trends that will open up more opportunities for Boomers in the future include the fact that many millennials who are starting companies really do not know how to run a business and are looking for “gray hairs” to help them manage the businesses and get them ready for investors, who want mature executives as well; and the fact that as Boomers get older, their needs and interests change, and they are a huge market — 77 million all told.

Who better to create new products and services for them than Boomers themselves?

Our website, www.revolutionary-retirement.com, has many helpful ideas of how to reinvent into new work in this next chapter, as does www.lifereimagined.aarp.org created by AARP.

Catherine Allen is the co-author of “The Retirement Boom: An All-Inclusive Guide to Money, Life, and Health in Your Next Chapter, Reboot Your Life, and The Artist’s Way at Work,” as well as co-founder of Reboot Partners, LLC, and can be reached at www.rebootbreak.com. She is Chairman and CEO of The Santa Fe Group.

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Every year of retirement isn’t the same.Flickr / Parker Knigh

Flickr / +gAbY+

Flickr / jenny downing

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