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What to Do and See in Vilnius, Lithuania?

View over Vilnius' Old Town from the Gediminas Tower — Beautiful panoramic view over the Old Town with its orange rooftops and church towers.

Want to know what to see and things to do in Vilnius? On my recent trip to Lithuania, I got to explore the best this city has to offer and want to share it with you.

Lithuania is a country with a long history. The first Baltic tribes settled here in the 7th-2nd centuries BC. The country is one of the three Baltic States – Lithuania, Latvia, and Estonia – and is located just north-east of Poland.

Vilnius is the capital and largest city of Lithuania with a population of only half a million people. The city has a unique Old Town which considered as one of the largest remaining and best-preserved medieval towns in Northern Europe.

Vilnius’ Old Town was listed on the UNESCO World Heritage list as one of the most beautiful and having the biggest Baroque style buildings in East and Middle Europe. No wonder it has been called a masterpiece of Baroque style.

When you plan a trip to Vilnius it’s best to stay in the Old Town, so you will be in the heart of everything and within a walking distance to all attractions.

Wander around Old Town

I feel that the Old Town has a perfect size to explore on foot. It’s a center of the tourist hub and there is no need for a touristy hop-on, hop-off bus. The Old Town is a labyrinth of narrow cobblestone streets, parks, squares and beautiful pastel tone houses, some of them in a process of renovation.

This part of a city is a mixture of different architectural styles – Baroque, Gothic, Neo-Classical and Renaissance. Some buildings are dated back to the 13th century. It’s so easy to walk around, admire the architecture and pop in and out of trendy boutiques, cafes and restaurants.

Places to see in Old Town

Cathedral Square

Cathedral Square is Vilnius’ most important gathering place. The Square witnessed mass anti-Soviet Union demonstration in the fight for independence in 1991.

This grand place is home to the country’s main Roman Catholic Cathedral (Sts Stanislav and Vladislav Cathedral). The Cathedral is connected to the Palace of Grand Dukes of Lithuania which was originally built in the 15th century for the rules of Lithuania and future kings of Poland.

Sts Stanislav and Vladislav Cathedral (mostly called as Vilnius Cathedral) was built in 1251 by Grand Duke on an ancient site of a pagan temple. Rebuilt eleven times, it received its neo-classical facade in late 18th century. If you want to explore inside the cathedral you would find the impressive tombs of the members of Polish-Lithuanian royal dynasty.

Bell Tower of Vilnius Cathedral is one of the oldest and highest towers in Old Town. It was built as a defensive tower in the 13th century. Later in the 16th century, it was converted into the Cathedral bell tower. You can climb the narrow and steep stairs inside the tower and enjoy the panoramic view of the city from the top. Also, you can join the crowds at 5 p.m. and listen to the sound of big bells.

There are plenty of city walking tours offered at Cathedral Square in front of the Bell Tower.

Walking tour with Old Town, Uzupis and Brewery

Town Hall Square (Ratusha Square)

Town Hall Square in Vilnius Old Town — Town Hall Square is surrounded by modern and historic buildings

The Town Hall Square is a traditional center of big events and fairs in Vilnius. The history of this square dates to the 14th century when in 1387 Lithuania became a Christian State.

The neo-classical building of Vilnius’ Old Town Hall is in the center of this square. Walk around to see a mix of old and new buildings surrounded the square, get a taste of local beer or just enjoy the relaxing afternoon at the outdoor cafe.

Pilis Street

People are walking along cobblestone Pilis St. in Vilnius'Old Town — Pilis Street in Vilnius’ Old Town is always busy with locals and tourists.

Pilis Street is one of the oldest streets in Vilnius’ Old Town. Since ancient times, Pilis Street has been the link between the Town Hall Square and Cathedral Square.

Walking along the street you can see the great examples of authentic architecture, and enjoy a great variety of cafes, restaurants, and coffee houses. At the end of the street, it’s easy to see the red brick walls of Gediminas Tower mounted on the top of the hill. It’s the only remaining part of Vilnius Upper castle.

As the legend goes, the Grand Duke of Lithuania, Gediminas, first built the wooden castle after he had a dream about an iron wolf howling on the top of the hill.

Gediminas Tower

People are walking around Cathedral Square in Vilnius — Vilnius’ Cathedral Square with the Palace of Grand Dukes facade and the Gediminas Tower on the hilltop

The Gediminas Tower is all that remains of the royal castle, named after Grand Duke of Lithuania, and it’s located on the top of a hill behind the Cathedral.

The castle dates back to around 13th century and houses a small museum. The best way to get to the castle is by foot or you can take a funicular. This place is very popular with locals and tourists.

It offers the best panoramic view of the city. You can see the Old Town with its orange rooftops on one side and modern part of the city across Neris River on another side. Don’t miss it. It looks spectacular in any kind of weather.

Churches

Vilnius is often called “the city of 100 churches”

Lithuania was the last country in Europe to convert to Christianity around the 14th century. It managed to stick to their Catholic traditions and beliefs for a long time even though the harsh rules of Soviet Union times.

Most of Vilnius’ churches are a great example of the Baroque style: domes, rich interiors, and richness of decorative details. I always feel overwhelmed by the beauty of them and craftsmanship of people who build these great monuments.

St. Peter and Paul’ Church

St. Peter and Paul’ Church is considered the finest Baroque church interior in Vilnius with more than 2,000 stucco figures and it’s worth visiting.

St. Anne’ Church

St. Anne’ Church is my favorite and deserves its own point. The first church at this site was built out of wood and was destroyed by fire in 1419. Then the church was re-built out of brick. The main facade designed in the Flamboyant Gothic style remains its most striking feature.

According to a well-known legend, Emperor Napoleon Bonaparte fell in love with the church. He was so much under the charm of the building that he wanted to take it home to Paris “on the palm of his hand” There is a special atmosphere when you walk inside this little church and spend some time breathing the air of the old history and legend.

St. Anne' Church in Vilnius'Old Town built in Gothic style and favored by Napoleon Bonaparte — St. Anne’ Church is called a masterpiece of Gothic architecture

Gates of Dawn

Gates of Dawn is the only surviving relic of the city’s original defensive wall, dated to 16th century. At that ancient time, the city was surrounded by a tall defensive wall and the only access to the city was through nine guarded gates. Today only one of the entrances remains – Gates of Dawn.

It attracts pilgrims from all over the worlds who come to visit and seek miracles from an icon of Virgin Mary which lives inside the Gate’s chapel.

The chapel with a sacred Virgin Mary icon once guarded an entrance to the original city. Even you’re not a religious person the Gates of Dawn will impress you. It’s much easier to come closer to the holy icon If you are there in the evening when all the tourist groups are gone.

Gates of Dawn in the Old Town of Vilnius — Gates of Dawn is the only surviving part of the city’s original defensive wall.

St. Casimir’ Church

St. Casimir’ Church is one of the finest Baroque churches in Vilnius. It’s located just a few steps from the Town Hall Square.

The construction of this monumental building started in 1604 and was completed in 1635. Then it was burnt to the ground 20 years later and then restored several times. The latest renovation project shows the beauty of the oldest Baroque-style church in Vilnius.

St. Casimir Church in Vilnius' Old Town — St. Casimir Church is the first and oldest Baroque-style church in Vilnius’ Old Town and next to Town Hall Square

Uzupis district

No trip to Vilnius would be complete without spending a few hours wandering the streets of its most unusual neighborhood – Uzupis and it translates “Beyond the River”.

You can get there by taking a short stroll across a bridge. It will bring to you to the self-declared republic of artists who declared themselves independent on April 1, 1997. Uzupis has its own president, prime minister, ambassadors, flag.

The biggest attraction is the constitution of Uzupis. You can find the whole text, translated into 15 languages, on the wall along Paupio street. One of my favorites: “everyone has the right to be happy and a dog has the right to be a dog”

If you want to explore the area properly, check all the quirky pubs and tiny art galleries, step into courtyards and spot some original street art. I always enjoy the bohemian feel and slow pace of life in this neighborhood.

Trakai Castle

Trakai Island Castle in Lithuania - view from the lake — Trakai Castle is on a picturesque lake Galve

Trakai is the old medieval town located just a half an hour from Vilnius. The main attraction is an impressive red-brick Gothic castle on a picturesque lake Galve. The construction of the castle started in the 14th century by the Grand Duke of Lithuania and completed by his son Vytautas the Great at the beginning of the 15th century.

The trip to Trakai and old castle could be a perfect day trip. You can get there by train, bus or a car.

red-brick walls of medieval Trakai Castle in Lithuania — We spent a few hours walking inside the medieval walls of the Trakai Castle.

Food

Traditional Lithuanian food is heavy and hearty, and it’s all about potato dishes. The most popular one is cepelinai (“Zeppelins”) – large boiled potato dumplings filled with minced meat or cottage cheese.

The most exotic Lithuanian dish is vedarai (potato sausage) – pork intestines stuffed with grated raw potatoes and baked in an oven or better in a wood stove.

Kibinais are traditional Lithuanian pastries filled with minced meat and onion. They are mostly associated with the city of Trakai.

On a hot summer day, locals love to eat saltibarsciai (cold beetroot soup) served with warm boiled potatoes.

photo of traditional Lithuanian cold beetroot soup — Traditional Lithuanian cold beetroot soup – saltibarsciai

There are so many great restaurants in Vilnius, but if you want to try traditional Lithuanian cuisine, I would recommend a few of my favorite choices: Lokys, Mykolo 4, Senoji Trobele or Etno Dvaras.

Beer

Lithuania is known as a beer-loving country. There are more than 80 breweries, large and small, producing all kind of beer, light or dark, weak or strong. There are plenty of pubs or bars off Ausros Vartu or Pillis Streets. I am not big on beer, but my husband does. He loves locally brewed dark ale with the bittersweet taste of it. Try any of these pubs: “Leiciai” or “Beer House & Craft Kitchen”.

Amber belt

window display with amber necklaces in the Old Town of Vilnius — Window shop display of amber necklaces in the Old Town of Vilnius.

The Baltic countries are famous for their amber and Lithuania is very often called “The Land of Amber”. Lithuania’s seashore is full of pieces of amber. Many amber artifacts dating to the 5th-6th century had been found during the excavation in many parts of the country.

In ancient times amber necklaces were used not only as a decoration but also as a currency. You can pick up a stylish take on the stone in the form of a necklace in many shops on Ausros Vartu or Pilis Street.

Places to stay

There is no shortage of all kind of accommodations in Vilnius.

We stayed at Radisson Blu Royal Astorija hotel next to the Town Hall Square. The location was perfect for walking around the Old Town. The hotel stands out with its Baroque-style facade. The beautiful architecture blends well with modern amenities. It has been recently renovated and accommodates guests in 119 comfortable rooms many of them facing the Town Hall Square.

George W. Bush was one of the hotel’s distinguished guest together with the long list of other dignitaries, royal families, and celebrities.

Getting to and around Vilnius

Getting to Vilnius should be relatively easy with the city’ recently modernized airport receiving flights from all over Europe. For this trip, we flew to Vilnius from Boston airport with one connecting stop in Frankfurt, Germany.

A taxi ride from the airport to the city center is short and relatively cheap between 10 to 20 euro. Getting around the city is simple and you can do most of it on foot.

But if you want to explore the city outside of the Old Town you can use an excellent city bus system starting at 5 a.m. and finishes at midnight. The city card like everything else in Vilnius is very affordable and you can buy one, three or ten passes.

Have fun visiting Vilnius!

Related Post: Our Trip to St. Martin

Have you been to Vilnius or any places in Lithuania?

How to Set Up Your Retirement Portfolio?

by Maggie Leave a Comment

woman and man are looking at the horizon and way to find a road

Reaching the age of mid-50s brings changes to our lives and especially the way we look at our retirement savings and investment portfolios.

For most of us, when we hit the mid-50s it’s like a wake-up call to start getting our retirement plans in order. Avoid thinking about retirement is not an option anymore. By this time, we’re no more than 10 or 15 years from our retirement date, unless you did an awesome job and retired by 50.

As 50+ women, we are at this good point of life when we still have time to look at our finances and make necessary improvements. On another hand, we already have a realistic idea of how we want to spend our golden years and how much money we need for it.

If you’re planning on working until your full retirement age, you still have 10 years to save and invest until you need access to your retirement accounts. This age gives you enough time to accumulate more money in your retirement portfolio and make some changes.

There is no one-size-fits-all investing approach for everyone at any age. There are a lot of factors to consider before deciding. A lot depends on your age and risk tolerance. Let’s assume that you need to set up a new retirement portfolio or modify the one you have already created.

How to start? What do you need to know?

Start with asset allocation

hi-rise glass buildings in financial district

The simple way to look at asset allocation is how your portfolio is divided between stocks, bonds, and cash.

There are three main asset classes:

equities (stocks)
fixed–income (bonds)
cash

The question is why asset allocation is so important for investing?

Asset allocation is an investment strategy which brings a different level of risk and rewards over time. That’s why you need to have a certain percentage of each asset in your retirement portfolio.

The final goal of allocating the investments to different classes is to reduce the risk and increase a return on your money.

What you invest in is all about your personal goals and risk tolerance. When you’re in your 20s or 30s you might prefer all your retirement savings in stocks. Why? You have time to recover the setbacks of the markets. Moreover, you’re probably not in your prime earning years yet and your income will increase in the future, allowing to compensate for any monetary losses.

When you’re in your 50s and 60s the timeline horizon changes together with the risk tolerance. At this age, you have to start thinking about preserving capital rather than making big profits in the markets. You don’t have time to recover your investments from market downturns.

You need to set up your retirement portfolio based on your age and risk tolerance.

Retirement portfolio based on your age:

You need to decide how much money to invest in stocks and how much in bonds?

The most popular rule of asset allocation is to subtract your age from 100 and invest that portion in stocks.

If you use this formula the list below gives you various options on how to set up your portfolio based on the previous calculations:

50 years old: 50% stocks and 50% bonds
55 years old: 45% stocks and 55% bonds
60 years old: 40% stocks and 60% bonds

However, many financial advisers say that we should change the base number from 100 to 110 and even to 120. The new numbers are based on studies showing that we live longer with every year.

Knowing that stocks outperformed bonds over the long run, we need to have a greater allocation towards stocks. Why? Because stocks provide growth to our investments.

Based on new age recommendation subtract your age from 120 and you get a new recommended asset allocation:

50 years old: 70% stocks and 30% bonds
55 years old: 65% stocks and 35% bonds
60 years old: 60% stocks and 40% bonds

Retirement portfolio based on your risk tolerance:

There is a direct link between risk and return on your money or simply put a reward. The greater the risk, the higher the potential return. Less risk, less return.

Do you know what type of investor you are? Are you risk-loving, risk-averse, moderate or something between?

The list below shows how to divide your investments based on risk tolerance:

Aggressive: 100% stocks
Moderately Aggressive: 80% stocks and 20% bonds
Moderate Growth: 60% stocks and 40% bonds
Conservative: 45% stocks and 55 % bonds

The goal of The Aggressive, Moderately Aggressive or Moderate Growth portfolio is to get an as high return on your invested money as possible. That’s why it invested heavily in stocks. Only stocks bring growth or higher return on invested money. On the other hand, it gets your portfolio exposed to market volatility.

The goal of The Conservative portfolio is to preserve the invested capital rather than achieving higher returns. That’s why it invested in bonds. Bonds don’t grow high as an investment but gives us a certain level of capital preservation and reduce the exposure to market volatility and the risk of losing money.

The final goal of any allocation strategy is to maximize returns on your invested money and minimize a certain level of volatility and risk.

How to use the rules of asset allocation?

The good way to start is to be honest with yourself. As I mentioned before what you invest in is all about your personal goals and risk tolerance.

What is your time frame? Do you know how soon you need to have access to your retirement savings?

If you have 10 to 15 years before start withdrawing money from retirement accounts, you might rely on stocks for higher return and growth of your portfolio. Even with the market downturns, you would have some time to recover your money. So Moderate Growth portfolio might the answer to your asset allocation.
But if you’re 5 years away from retiring, you might consider a conservative approach or at least 50% stocks 50% bonds portfolio.

What is your risk tolerance?

Do you remain calm during the market ups and downs? Do you have sleepless nights when you heard the news about the recent market crash?

So, if safety and preserving the capital is your top priority, you might consider increasing your bond percentage. But don’t forget that we still need to have growth in our retirement portfolios to beat the inflation.

Stick with safe investments like money markets, CDs, and bonds if you want to avoid risk entirely. This asset allocation will let you avoid stocks completely, but leave you exposed to inflation.

You need to decide what works for you and what doesn’t. These strategies will be different for people who are already retired or those who are not.

If you’re already retired, these allocations may not be right for you. You will need to take regular withdrawals from your retirement savings. It changes your goal from maximizing returns to bringing steady income for life.

In the end, you should stick with the allocation model which works for you and your personal goals. Just remember, as you age and transition to a new phase of life your retirement portfolio needs to change as well.

If you want to know more about investments, asset allocation and portfolios head to Step-by-step guide to evaluating your investments and performance by Fidelity Investments.

My retirement portfolio asset allocation

table with a laptop computer and women's hand with a cup of coffee

I’m a risk-loving investor with moderately aggressive asset allocation strategy. I have 85% invested in stocks and 15% in bonds, cash, and others. I believe stocks will outperform bonds over the long run, but we’ll see continued market volatility from time to time.

Before starting this blog, I was happy with high exposure to stocks. Usually, I don’t have a sleepless night or start selling the stocks when the market goes down. My retirement portfolios consist of individual stocks, mutual funds, ETFs and some bond funds. Typically, I set up the trailing stops for all my individual stocks. This way it helps me to capture the gain when the market goes up and limit the loss when the market is down.

However, I started to feel that I need to simplify my portfolios and change the asset allocation from Moderately Aggressive to Moderate Growth. My goal is to start re-balancing our portfolios to meet 70% stocks and 30% bonds and cash allocation. This change will help to preserve the capital value of all portfolios and yet give me enough exposure to future market growth.

Putting it all together

Hopefully, this post will give you a basic idea how to set up your own retirement portfolio, create an asset allocation strategy and find methods to improve returns while reducing risks of losing money.

If you are ready to start, learning is a must. You want to take your time, do your research and make wise decisions. Set your goals, read the books and expand your mind with good information. All the knowledge you gain today will affect your financial well-being for years to come. You need to understand what you’re investing in. It doesn’t need to be complicated. It could be simple and easy steps to follow. Invest your time and energy to plan for the future and learn how to improve it.

How to set up your portfolio based on asset allocations article is not a recommendation and serves only as a guide. The opinions voiced in this material are for general information only. I am not providing any specific advice or recommendations to any of my readers.

Finding the Best Place to Live in Retirement

by Maggie 2 Comments

a summer hat with sunglasses laying on the Caribbean beach bench

When it comes to thinking about retirement, everyone dreams about fun and leisure. You recall your last amazing vacation place and start thinking about how awesome it would be to live there in retirement. Dreaming about retirement could bring a lot of fun. Finally, you can choose where you want to live.

You no longer need to be concerned to live closer to where you work or to where your kids go to school. Instead, you can relocate to a place with a better climate, many recreational activities and lower cost of living. There are so many factors to consider when it comes to choosing YOUR best place to live in retirement.

Hopefully, this post will help you find the place that is a perfect fit for you.

Cost of living

If in the past the retirees were looking to live in places with a warmer climate, the new generation of baby boomers is more concern about taxes and cost of living. People live longer and the biggest fear of running out of money in retirement is real. Low cost of living and housing costs are important to all of us, but it becomes critical when we retire and start living on a fixed income.

When you start preparing for a new life transition, make sure to do enough research on your new destination. Before moving to a new place, you want to know how much it will cost to live there. It’s important to get some sense of the local cost of housing/rent, utilities, groceries and transportation.

There are several retirement planning web sites providing valuable information for retirees. For example, Best places.net compares 370 metro areas on several factors including cost of living, climate, crime rate, and schools.

Search best places to live at Best places.net

My favorite go to a website is Top retirements.com The website provides you with tons of information for best retirement communities and places to retire, list of 55 plus places and retirement homes for seniors. If you’re at the beginning of your search, start with top retirements.com to get some ideas and an overview of places to retire.

Search best retirement communities to live at Top retirements.com

Taxes

If you live in a high cost of living and high property tax state, you might want to relocate to a more affordable place to stretch your retirement funds. For many people taxes might be an important deciding factor. There are states like Florida and Texas which do not have a personal income tax. But some other states like New York, Colorado and Georgia offer favorable tax breaks on retirement income.

Regardless of your tax planning you still want to feel happy in your new place. Where and how to spend your days in retirement still should be a more important factor than low taxes.

If you want to know more about taxes, check out State by State Guide to Taxes on Retirees by Kiplinger

Related post: How Much Will It Cost to Retire?

Climate and weather

a group of retirees sitting on the deck in the middle of the mountain lake with a scenic view

When people grow older, they prefer to live in a warmer climate. That’s why many baby boomers are moving to southern states where they can stay active longer than in cold weather. Besides, you don’t want to shovel the snow as your only physical activity. Even walking along the street in the winter could be dangerous for an older person, because you will be afraid to injure yourself slipping on the ice.

However, the statistics show that most the baby boomers stay put or downsize close to their neighborhood. Snowbirds lifestyle become popular among many retirees when you can spend six months living in Florida or Arizona in the winter and then come back home in the summer.

Recently, I read an article about retirees focusing too much on climate while deciding on places to retire. According to Paul Irving, chairman of Milken Institute Center for the Future of Aging:

“Weather alone is not as meaningful as how you want to engage in your life in your golden years”.

Quality of healthcare

When you start looking for the best place to live in retirement, access to good healthcare is a must. At the beginning of your retirement, you probably will be healthy and need only routine doctor visits. But If you already have a medical condition that requires regular treatment, make sure that your new place has specialty doctors available.

As you grow older access to retirement facilities, home care providers and transportation for people with disabilities will become a crucial factor. You don’t want to move to another place in search of better healthcare in your late 80s.

So, when you start looking for a new place you should factor the quality of local hospitals and the availability of good doctors. It’s a good idea to include in your research the access to affordable assisted living facilities and nursing homes in an area.

Another important factor to consider is how close you live to medical facilities. According to the stats, many retirees want quality medical care within 30–minutes’ drive.

Safety

a middle-age couple walking under umbrella along the sunflower field

Choosing a new place to live in retirement will often come with safety concerns. As you grow older you become more vulnerable. There are stories all over TV and internet about seniors who felt victims of crime in their neighborhoods, physical abuse or lost money as a result of a scam.

Look at the crime rate statistics and economic data for places you are considering as your future new home. Also, it’s good to remember that the crime rates vary in a different part of the city and you not necessarily will be moving to that neighborhood.

Lifestyle and activities

Think about the activities you’re planning to enjoy in retirement. Do your research and find out if the place will offer any activities to support your interests and hobbies. Is this place located close to hiking trails, golf courses, swimming pools or has several fitness clubs?

Be clear on your priorities. If you enjoy art and live music, theater and movies, museums and art galleries, you will want to live in a place where these opportunities will be in abundance. Check out the web sites or on-line community newspaper for a list of cultural or sporting events to get a snapshot of local life.

Then think about what it is you value in your everyday life now. Make a list of places you like to go grocery and clothes shopping, name of your favorite restaurants and coffee shops, and so on. If you live in a city and planning to move to a rural area, ask yourself if you would be happy to live in an area where these places are not present.

Access to a major airport

a woman walking along tall glass windows of airport

Many baby boomers are looking forward to their retirement years and planning on traveling and exploring the world. If you are one of them, access to a major airport will be an important factor. Look at the number of regular flights offered by an airport and number of connections you will need to make to reach your favorite destinations.

You’ll probably appreciate living within a reasonable drive from an airport. Having to drive several hours to an airport will make travel more tiresome and costly if you need to take a taxi, Uber or another kind of transportation.

Besides, if you choose to live in a place with proximity to an airport, it will make easier for your kids, family, and friends to come and visit you.

Visiting your best places

You spent hours browsing the internet, reading and collecting the information. You created a checklist with all the important factors. Finally, you came up with a list of a few favorite places you and your spouse agreed on. Now it’s time to visit those places to find out if it really fits your idea of retirement.

Narrow down your list from five or six places to three or maximum four and start visiting them. It’s important to visit your favorite places several times throughout different seasons. Don’t spend all your time near the hotel. Instead, get out and live like a local. Walk around, visit neighborhoods to get a sense of people, and eat at local restaurants, and not the touristy places.

It’s recommended by experts to rent before you buy. Renting will give you some time to get familiar with neighborhoods, and available homes in different parts of town. It’s a good idea to talk to local real estate agents and ask questions about housing prices and the best places to buy even you’re not ready.

Be clear about your future priorities. If you want to work part-time or do any kind of volunteer work, make sure that you’re moving to an area where a local economy is booming. Check out local websites and find out if there are job opportunities for people your age.

Related post: The Best Places to Retire in 2019

Putting it all together

Finding the best place for you to live in retirement will take time and efforts. Many baby boomers fail to do basic research and planning before they embark on this major life transition.

You need to envision it, set up the priorities, do the research, make a list of areas, and then visit several places before you finally decide where to move in. Don’t be discouraged by the amount of work you have to put up front. In the end, you will benefit greatly by living and enjoying the retirement of your dreams.

Where are you planning to retire? Are you planning to move to another area or retire-in place?

Share your thoughts in comments.

7 Easy Steps to Help You Set Up a Budget

by Maggie 2 Comments

a roll of money growing out of earth next to bamboo shoots

Are you looking to take control of your finances?

If the answer is yes, a simple but effective budgeting system can help you reach this goal. In the beginning, the budgeting may seem overwhelming and taking too much time. But if you create a good money management system it will help you to see where your money is going and how much you have left to save and spend.

Why do you need a budget?

Budgeting means managing money. Are you trying to pay off the debt, save money for retirement or increase your emergency fund? Setting up financial goals helps you to stay focused.

Take the time to set up your personal financial goals and make sure that they are realistic. You don’t want to get discouraged if for example, you want to save $70,000 for a down payment on a house in just a year when you only make $50,000.

I like to put my financial goals on a piece of paper and look at them from time to time. It reminds me that there is a purpose for why I’m doing this.

Once you finished setting up your financial goals, just follow these 7 easy steps and set up a budget.

Step 1. Collect all your financial information

The goal for creating a budget is to see a monthly average. So, the more financial information you can gather the better.

Put together in the folder (paper or electronic) your pay stubs, bank statements, recent utility bills, credit card statements, medical bills and any information regarding a source of your income and expense.

Step 2. Calculate your income

After you put together all your personal financial information, start with calculating how much money you have each month.

This step is simple if your only income comes from a stable job.

Typically, an income comes in the form of a regular paycheck where taxes are automatically deducted. So, use your payroll stabs or direct deposits to calculate how much money you bring home each month. This is your net income or take-home pay amount. Put it in your spreadsheet as a monthly income.

If you’re self-employed, combine your take-home pay from the past year and divide it by 12.

If you have an additional monthly income from your rental properties, child support or freelance job, add the amount to your monthly income.

Your main goal is to calculate the total income you receive on a regular basis.

It is important to know how much money you have coming in so that you know how much is left to save and spend.

Step 3. Calculate your fixed expenses

Most of the time budget is all about tracking your expenses.

If you don’t track your spending, you need to start. Your monthly spending should be divided into two groups – fixed expenses and variable expenses.

Fixed expenses are the ones where the amount to be paid remains the same most of the time. It’s an easy category which includes necessary expenses you must pay each month.

Start with a list of your fixed expenses:

Rent or mortgage
Car insurance
Car loan payments
Medical Insurance
Student loan payments (if you have any)
Utility bills
Cable bills
Cell phone bills
Internet bills

Step 4. Calculate your variable expenses

Variable expenses are a category that changes from month to month.

Groceries
House maintenance or repairs
Car fuel and maintenance
Clothing
Dining out
Movie or concert tickets
Gym membership

I know it’s hard to group these expenses together since they are not the same amount each month. But to make sure that you have a realistic budget, you’ll need to calculate every single expense.

Step 5. Determine your irregular expenses

I have a separate category in my budget for irregular expenses:

Property taxes
Car registration
Medical Co-pays
Christmas/ Gifts
Vacations/ Travel

This category is for annual expenses. At the beginning of the year, I combine all these expenses and add them up to my budget. I try to project the number based on previous years and typically add $1,000 to the total for anything forgotten.

I use separate savings account for this fund and call it “Vacation Fund” I don’t want it mixed in with my regular savings account. We spend a lot of money on travels, so I like to save money for this fund each month.

Step 6. Compare your expenses to your income

woman is balancing on the short stool while trying to reach for the book on the upper shelf

Now it is time to compare your total expenses to your income.

Add up your monthly expenses (step 3, 4 and 5) and subtract this amount from your total monthly income (Step 2).

After subtracting your expenses from your income, you should have zero as your balance.

Zero as your balance means your income is equal to your expenses.

But you might end up with two other options in your balance.

Budget with negative balance:

You are spending more money than you make. It’s never good and your goal is to reduce some expenses.

The cost of discretionary expenses should be the first and easiest to cut.

Look at your variable expense’s category (Step 4) and list your discretionary expenses. Discretionary expenses is the money you spend on restaurants, entertainment, vacations, gifts, various membership, spa, and massages. This category of spending takes up a large chunk of your monthly budget.

When you really need to cut discretionary expenses, this is where you should start.

Make your own lunch instead of buying it every day
Stream a movie at home instead of going to the theater
Visit the local library instead of buying books
Use public transportation instead of driving a car to work
Cancel gym membership and go hiking, biking, swimming or just walking
Trim down on special treats: brew your own coffee and pack a healthy snack

Fixed expenses are harder to cut. But you can save a lot of money by doing so. Look at your big items or necessary living expenses and see where you can cut or negotiate a lower cost.

Reduce your electrical bill by cutting down on energy consumption
Cancel a cable and sign up for Netflix or ask for a special on your cable/internet package
Cancel landline phone and use cell phones instead
Ask for a re-assessment of your home value, if your property taxes are too high
Negotiate a lower insurance rate for your house and car insurance policies
Negotiate a lower rate for your student loan or consolidate your student loans

Budget with positive balance:

You are making more money than you spend each month. Congratulations!

Look at your financial goals and decide what do you want to do with extra cash in your budget. You can put more money into retirement savings or pay off your debt faster.

The ultimate goal is to have your income and expense categories equal in the amount of money you spend in both areas. This means all of your income is accounted for and budgeted for a specific goal.

There is a simple to use budget worksheet from Kiplinger.com. If you want to give it a try, open the link below, download the worksheet to your computer and open it in Ms Excel program. The worksheet is very easy to modify and use for your own household budget.

Household Budget Worksheet from Kiplinger

Step 7. Keep track of your budget

After creating your budget, you need to make sure that it is working.

You need to monitor and adjust it on a regular basis. It might sound boring and tedious, but this is your money managing system and you need to keep it under control.

Graphic image on the white table - less is more

Find a way to track your spending. It could be done electronically using Excel spreadsheets and software programs like Quicken, Mint or Personal Capital. But plenty of people still use an old school method and stick to a paper budget.

Money management programs: Quicken, Mint, Personal Capital

I like to use Personal capital and love how easy it makes to organize and categorize my personal finances.

Whatever system you use, you need to look and asses your budget once a week or once a month. Tracking your budget should give you a general idea if you are on the right path to your financial goals.

A budget won’t work unless all parties of your household are involved and fully on board. It will be a big mistake for not having agreements with your husband and your family. There will be no point in trying to cut on cable or electricity unless everyone agrees on it.

My husband and I are both involved in managing our family finances. Roman takes care of budgeting, paying off bills and credit cards. I am mostly involved in managing our investments. But we talk and go over our budget and finances regularly. It helps to know that everyone stays on track and we work together on achieving the same financial goals.

Putting it all together

Your budget is the foundation of your financial life.

Anyone can set up an amazing money management system on a paper. Making it work is quite another thing. This requires commitment and technique. Budgeting can be hard in the beginning, but if you stick to it, all your efforts will pay off. In the end, you’ll learn how to take control of your finances and to achieve your financial goals.

Do you have a budget? Share with us your budgeting tips!

Retirement Planning – How to Calculate Your Income Gap in 5 Easy Steps?

by Maggie 2 Comments

Two women riding the bicycles along the countryside road

Millions of women approaching retirement age have nothing saved up and depend on Social Security alone. Other women are worried of what will happen to them because they will retire with a small balance in their retirement account.

If you are a reader of this blog, it means you take preparing for retirement seriously and want to learn more on the topic.

When I think about planning for retirement I think about it like assembling the financial pieces of the puzzle. It takes time before everything fit into the right places and you can see the whole picture.

The important part of this process is to calculate your retirement income and expenses and see if you have a gap between them.

Why identifying an income gap is important?

When you retire, you can no longer count on a paycheck from work. You will start relying on a fixed income, such as Social Security or pension. But the income from these sources may not be enough to cover all your regular expenses.

That will leave you with the gap between income and expenses. In this situation, you will depend on money from your savings and retirement accounts to cover the expenses.

Let’s find out how much is your income gap in 6 easy steps.

Step 1. Review your current financial situation

A bee is collecting nectar from the small flowers on the green bush

You need to see where you are right now and what do you have. Take an inventory of all your financial assets.

Start by collecting all your financial information:

How much is the current value of your house?
How much do you have in your retirement accounts, 401(k), IRA, Roth IRA?
How much do you have in your investment accounts?
How much is the current value of your rental property or vacation house (if you have one)?
How much is the value of your collectibles, gold coins, if you have any?

If you want to know the current value of your house, use Zillow for an approximate estimate.

Recently we refinanced our mortgage and it came with an appraisal report. I use this estimate as the approximate value of our house. You can ask the local real estate broker to give you the most current evaluation of your home, your rental property or a beach house if you have any.

Put all this information in the Excel spreadsheet or just use a piece of paper and call it Financial Assets Category.

Step 2. Estimate your retirement income

The next step will be to find out how much is your combined retirement income.

The income in retirement will come from different sources.

For many people, a Social Security paycheck will be THE ONLY income in retirement.

Other people will have an additional income coming from savings, retirement accounts, annuities, rental properties and/or dividends.

The more sources of retirement income you have the better off you are in your golden years.

Collect all this information and add to your Excel or paper spreadsheet under the Retirement Income Category.

Most of the information you have already collected while taking inventory of your financial assets. You just need to add the amount of your Social Security benefits.

Use the link to the Social Security Administration for information.

Step 3. Estimate your retirement expenses

There are many ways to estimate expenses in retirement.

A simple way to estimate your retirement expenses is to know where and how you spend your money today while you are still working.

Grab all your bank and credit card statements, your bills and any other financial information you have and calculate the total. This total number shows your monthly expenses today. The hard part of estimating retirement expenses is to predict how it will change in 10 or 15 years.

A common rule of thumb to use is that you will need about 70 to 80% of your current spending.

Here is a simple calculation.

If your current spending is $5,000, in retirement it will be approximately $3,500 to $4,000.

But if you are planning to maintain the same lifestyle as today, or splurge on a lot of travel trips or have expensive hobbies, your retirement expenses will be $5,000 or even higher.

Step 4. Calculate the balance between income and expenses

A woman looking at IPad while sitting at the table with a cup of coffee

Finally, you collected all the information and have the full financial picture in front of you:

Inventory of all your assets
Your retirement income
Your calculated expenses

The next step will be to calculate the balance between your income and expenses.

Did you find out that you have an income gap in your future budget? If yes, how do you cover it?

Here is a simple example.

You are planning to spend in retirement $5,000 a month ($60,000 a year).

Your guaranteed income from Social Security and/or pension is $4,000 a month ($48,000 a year).

$5,000 – $4,000 = $1,000

Based on the calculations you have an income gap of $1,000 a month ($12,000 a year)

Step 5. The ways to cover an income gap

How do you cover the retirement income gap?

Reduce your spending in retirement
Plan to work longer, so you can save more
Delay to collect Social Security to increase the future pay
Withdraw money from savings and retirement accounts

Even you are planning on working longer, to save more and delay Social Security might be still not enough to eliminate the gap completely.

According to statistics the average retired worker will receive around $1,360 per month. And the average retired couple will receive $2,260 per month. These numbers are adjusted with every year and not to the higher end.

The idea of working longer, saving and investing more becomes important when we look at the statistics. For many of us, the Social Security check will cover some of the basic retirement expenses.

However, if we want to maintain our current lifestyle or dreaming about active and fun years in retirement, we need to know how we will cover the gap between income and expenses.

How much money to withdraw from retirement accounts?

You have built a good size nest egg to live off it in retirement. After you retire and stop receiving the paycheck from your employer, you will start spending your retirement savings to cover the expenses. You need to be careful about how to withdraw money from your retirement savings.

The popular rule of thumb is 4 percent or “safe withdrawal rate”.

Its recommended by many financial planners and advisers. There are many debates between financial professionals if 4 percent is safe enough. Some of them recommend to reduce it to 3 or 3.5 percent. The main idea is you should be able to withdraw 4 percent of your portfolio value without ever depleting it to a dangerous level.

In what order to withdraw money?

When you retire, you get to decide how much to take from your savings and retirement accounts and in what order. The order in which you withdraw money from your accounts can impact how long your portfolio lasts in retirement.

In general, you should withdraw money in this order:

First – from taxable investment accounts
Second – from tax-deferred accounts – 401(k), IRA
Last – from tax-free accounts – Roth IRA

The reason behind this order is how much you must pay in taxes. Taxes will likely be one of your largest expenses in retirement. You will have more control over taxes, if you will be smart about withdrawal strategies.

The longer you can keep money in your tax-deferred and tax-free accounts, the better. It means that more money stays in your accounts and grow over time.

A screen showing images of stock market numbers, american dollar banknotes and an arrow

Everything will change once you reach 70 ½. At this age you must start taking money from your tax-deferred accounts based on IRS rule.

The rule is called a required minimum distributions (RMD) and it cannot be ignored, otherwise, you will get penalized.

So, if you are 70 ½ years old the order of money withdrawals will change:

First – withdraw your required minimum distribution (RMDs) from a combined balance in retirement accounts
Second – if you still have an income gap, pull money from taxable investment accounts
Third – if you deplete the taxable accounts, go back to your tax-deferred accounts
Last – pull money from tax-free accounts

Final thoughts

You’re in good shape, if you can stretch your financial assets to create enough income to cover basic expenses in retirement. But if not, you’ll need to find additional ways to increase your income or reduce your spending.

Even if you think that you’re far away from retirement age, you might still consider some of the options above. The main reason we are saving money for retirement is so we can spend them when the time comes. To learn and prepare yourself and your finances for the future is better than to ignore it.

This post is only for educational purposes and serves as a guideline for the readers of this blog who wants to learn about retirement planning. Please don’t rely on it as a tax or investment advice.

Did you come up with the numbers for your retirement income and expenses? Do you have an income gap?

Have you started thinking about how to withdraw money from your savings and retirement accounts?

Please share your thoughts with us.