Think You Can’t Ever Retire? Think Again!
It is a common refrain these days: “Oh, I’ll never be able to retire!” But is that true? Partly, it is. We have a much harder task than our parents and grandparents did regarding our ability to retire. Therefore, some creativity and “out of the box” thinking is required. Here are some things to consider when retirement seems out of reach.
Wait to retire. It is ingrained in us that retirement starts at 65. But really, the default retirement age should have been increasing over the last few decades as our life expectancy increased. As such, people in their 40s and 50s should be thinking of age 70 as a better target for full retirement age. Any changes in the Social Security system between now and then would almost certainly delay the full retirement age, so the best plan is to start changing your mindset now – aim for 70. That gives you at least five more years of saving for retirement and growing your Social Security benefit, and at least five fewer years that your nest egg must support you. A true win-win in the retirement game.
Become debt-free. As you are moving along toward retirement, make it your highest priority to pay off your debts. The less income you need in retirement to cover your bills, the better off you will be.
Consider alternative housing. If paying off your mortgage by retirement seems like an unobtainable goal, then come up with a different plan. Will you be able to downsize your home without taking on a new mortgage? A good test for this is to consider home values now. Compare what you could sell your home for today with what the cost would be to buy a smaller, more affordable home. Would your current home equity be enough? Asheville is a tough market – it is frequently the case that you cannot sell your 3500 square foot home, downsize to a 1500 square foot condo, and actually come out ahead. So, start evaluating what your housing options might look like.
Get a roommate. Another option is to consider sharing your larger home by taking on a roommate. If you can subdivide your home (such as creating a separate access to your basement), all the better. Think about ways you could cut your existing home costs through sharing.
Move to a lower-cost area. Many people have discovered that there are other places to live that can have significantly lower costs of living than where they currently live. Start your research now, and you might find that moving to this new place before retirement might actually be the best plan. Depending on your career, you might find work in a different town that might allow you to decrease your expenses and increase your savings more significantly before retirement. Don’t forget to consider other countries, too! Stories abound of people moving abroad to save significantly on their retirement cost of living.
Evaluate renting versus owning. It always will depend on the housing market in your area, but check out what it would cost to rent an apartment. This might require significantly reducing the amount of stuff you own, but would that actually be a bad thing? Think streamlined! Think nimble! Sometimes on the surface, renting seems more expensive than owning. But once you closely look at the total cost of home ownership, you might find that is not the case. Remember that in addition to your mortgage payment, to own your home you must also pay homeowners insurance, property taxes, and various (sometimes significant) expenses to keep up the property. Renters insurance is dirt cheap, and the avoidance of additional expenses can add up. Besides, it might be nice to call someone else when you have an appliance break down versus having to deal with that yourself!
Start planning your second act. Depending on where you are in your career, start now to think about something you might want to do as work in your later working life, and possibly into retirement. Moonlight, get educated, whatever it takes to start moving yourself toward that goal. Creating a plan that has you working well into your 70s is the best bet if you do not have an adequate nest egg to retire.
Or just continue your current career. Some people like what they are doing and can see themselves continuing that same work into retirement. That is also a fine strategy. Again, planning to work well into your 70s would be an excellent target. If your employer and/or career allows it, cut your work time back as you age so that you can have a more relaxed shift into retirement living. That might end up being the best of both worlds for people that love what they do!
Keep yourself healthy. Health care costs are the biggest killer in retirement. Lose weight, eat well, exercise, sleep well, get regular check-ups, and do whatever it takes to keep yourself as healthy as possible as you head into retirement.
Expenses, expenses, expenses! Become a master at tracking and analyzing your expenses. It is imperative that you have a very good handle on what you are spending as you plot your retirement strategy. Start trimming needless expenses, and make a game plan to continue streamlining your expenses as you march toward retirement. Evaluate what truly brings meaning and joy to your life and work to cut expenses in the areas that do not fit that bill. That gym membership that does nothing but make you feel guilty for not using it? Eliminate it! Cutting and controlling your expenses is the single-most important factor in retirement planning. Underestimating your need for income in retirement could have devastating effects on your nest egg, not to mention your confidence.
Simplify, simplify, simplify! Now become a master at wanting and needing less in your life. In addition to cutting expenses, streamline your stuff. Sell the valuable items you no longer need, and discipline yourself to stop buying crap you don’t need. Two excellent books on this topic are Francine Jay’s “The Joy of Less,” and Marie Kondo’s “The Life-Changing Magic of Tidying Up.”
Take up less expensive hobbies. Gear- or tool-intensive hobbies can really take a bite out of your budget. Consider the sorts of things you like to do, and challenge yourself to find cheaper ways to do them. Or ditch the expensive hobbies altogether and find new, more affordable pastimes. While I am certain you could make hiking or gardening into a very expensive hobby, I also think those hobbies can be done on the cheap. How about volunteering? Think creatively about how you might turn a beloved hobby into an opportunity to volunteer. Pets come to mind – they can be expensive. But what if you didn’t have pets of your own, and instead either spent time pet-sitting for others (which can bring in some extra income, too!) or volunteering at an animal shelter. Reading, especially if you use your library, can be inexpensive or free.
These are just some ideas to get your creative juices flowing. The main thing is to start thinking and planning, and get some goals down on paper. Seek the help of a financial planner if necessary, to help you test-drive your goals and figures. Instead of giving up the hope of ever retiring, take on the challenge of crafting a realistic retirement. It might not be the retirement you dreamed of, but if you try hard and keep at it, you might just create for yourself a dream retirement.
Dawn Starks is a CERTIFIED FINANCIAL PLANNER™ practitioner and financial advisor at Starks Financial Group. Starks Financial Group is not a registered broker/dealer, nor is it affiliated with Raymond James Financial Services. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment Advisory services offered through Raymond James Financial Services Advisors, Inc. This article expresses the opinions of Dawn Starks and not necessarily those of Raymond James. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER ™, and CFP® in the U.S. Raymond James is not affiliated with and does not endorse Francine Jay or Marie Kondo.
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440 Montford Avenue
Asheville, NC 28801