Lifestyles of the Personal Finance-Savvy: 8 Ways Retirees Can Spend Their 401K
The average age of retirement in the United States is 62 years old, with retirement typically lasting about 18 years. That’s a long time to be living on money that’s been squirreled away via savings, investments, and a 401K. Fortunately, if you’ve been smart with your money and planned ahead for retirement, you can live comfortably and enjoy your golden years by spending some of your savings on fun activities.
Below we highlight 8 things retirees can spend part of their savings on, and illustrate how much money would have to be put into a 401K to afford such luxuries. Each amount was based on a tax rate of 28% and stock market returns of 12%, with a 50% employer match program and 30 years until retirement.
If you need a refresher on how a 401K plan works and why it’s the most fiscally sound option when saving for retirement, check out this video to learn why it’s ideal for maximum savings potential.
Caribbean Cruise
What better way to enjoy retirement than to take a relaxing two week cruise through the Caribbean? There’s no better reward for decades of hard work than crystal blue waters, sandy beaches, warm temperatures and piña coladas.
Sample cost: $3,500
401K savings: $13/year, or about $1/month
European Vacation
A two-month trek through Europe would be quite the adventure. A retired couple could visit multiple cities, take in multiple historic attractions, sample great food and wine, and bask in the diverse European culture.
Sample cost: $10,000
401K savings: $38/year, or about $3/month
Time Share
Time shares are handy options for couples who enjoy traveling but don’t want to be bogged down with a vacation home in a set location. They can visit numerous cities without worrying about hotel rates or fluctuating fees.
Sample cost: $20,000
401K savings: $77/year, or about $6/month
Cabin Cruiser Boat
Take to the seas in a roomy, comfortable cabin cruiser. The cost of a boat varies depending on its size, engine type, age and condition, but once you’re out on the water enjoying retirement, you’ll probably think the purchase was well worth it.
Sample cost: $50,000
401K savings: $192/year, or about $16/month
Luxury Car
A lot of people splurge on their dream car once they’ve retired. Whether they’re in the market for a flashy sports car or are looking to buy a luxury sedan, their purchase will probably cost significantly more than your standard Chevy Aveo.
Sample cost: $70,000
401K savings: $269/year, or about $22/month
Class-A RV
Many retired people buy RVs so they can take to the road and explore the US. There are several different types of RVs, with the class-A RV being the largest and most expensive, but we’re betting that most retirees would justify the cost so they can cruise from coast to coast in style and be comfortable.
Sample cost: $90,000
401K savings: $345/year, or about $29/month
Home Remodel
Many retirees finally have extra time for all of those home projects that have added up throughout the years. Some people may opt for a new kitchen, while others splurge for an addition to the house or a revamped master bedroom suite. Whatever the project, it’ll likely cost a pretty penny.
Sample cost: $100,000 for a new kitchen, bathroom and master suite
401K savings: $384/year, or about $32/month
Vacation Home
It’s common for retirees to purchase a vacation home in a warm locale, to be close to family, or simply because they like visiting a particular destination. Vacation homes obviously range depending on the size and type of home and its location, but for most retired people it’s a necessary cost that they’ll appreciate for the rest of their lives.
Sample cost: $300,000
401K savings: $1,151/year, or about $96/month
Sources
1. http://www.budgettravel.com/bt-dyn/content/article/2005/06/04/AR2005060400460.html
2. http://www.rvinsiderguide.com/html/rvinsiderguide/articles/average-prices-of-rv.html
3. http://www.costhelper.com/cost/leisure/caribbean-cruise.html
4. http://cgi.money.cnn.com/tools/renovation/renovation.html
5. http://answers.yahoo.com/question/index?qid=20081025105647AAQhdnU
6. http://www.washingtontimes.com/news/2009/apr/13/rising-costs-of-health-care-hamper-retirees/
