Depending on one’s overall approach to life, a person may not be naturally inclined to make the changes necessary to ensure that his retirement years are characterized by great financial stability. Nevertheless, when it comes to surviving financially during retirement, we have to accept that living within one’s means is exponentially more important during the final phase of our lives, when our ability to go out and earn money is consistently diminishing. So how do we best deal with this?
Keep working. The best way to ensure you won’t have money problems in retirement is to work as long as possible. The security you continue to realize by earning a regular paycheck, as well as the wonderful service you do your physical and mental well-being (which is so important as you age), is your best defense against financial insolvency during retirement. What’s more, given the great flexibility in how people can often work nowadays (entirely on the computer, from home, etc.), the physical impediments to working in your advanced years can be significantly reduced. To be clear, I’m not necessarily talking about putting in full-time hours, or making money at a highly-competitive rate (although if you want, and are able, to do those things…fantastic), but if you were bringing in “just” another $1,000 per month, on top of your Social Security and other retirement savings, that could make an enormous difference in the lifestyle you’re able to enjoy (note: for the purposes of this article, I am assuming you’ve reached full retirement age with respect to Social Security, when your benefit is not diminished as a consequence of continuing to work).
Eliminate all debt. This may seem like a no-brainer, but it’s amazing how many people are conditioned to think that debt does not include a car payment and a mortgage. However, you should strive to eliminate all of the debt you have by the time you reach retirement, and that means your mortgage and car payment(s), as well. If you still have another ten years or so until you plan to cease working, put that mortgage at the top of your list of priorities, and make as many extra principal payments as you can to rid yourself of that thing.
Switch to a house and car that are cheap and simple. This is something that goes hand-in-hand with the previous point, and the value derived by making this change can be extraordinary. Part of arriving at the place, mentally and emotionally, when you allow yourself to make these kinds of changes, is to come to see life’s priorities through a different lens. Retirement is the point at which you can, ideally, take time to smell the proverbial roses, and you don’t need a big house or a fancy car to do it. The bigger the house, the fancier your car, the more you will have to spend in order to maintain both.
Don’t be too conservative with your investments. This is not something you will often hear, as the standard advice is to get very conservative with your portfolio when you retire. It sounds good, but your ability to be conservative varies in direct proportion to the amount you’ve accumulated; the more you have, the more conservative you can be, but the less you have, the more growth-oriented your portfolio will have to remain so that you do not consume early in your retirement the lion’s share of what you have saved.
Retirement can actually be easy to navigate, but in order for that to be the case, you can’t arrive at your Golden Years having spent no time engaging in serious planning. Even if you are already in the midst of retirement, take another look at your situation in terms of the issues raised here, to be sure you’re really prepared to thrive during what should be the best years of your life.
The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.