My friend Alex, at age 56, has made very little plans for his retirement. He also believes that he is too old to start. In a recent conversation with him, I learned:
- He has very little (if any) retirement investments and is not currently saving any appreciable amount.
- He will still be making house payments he is 71 years old.
- He has recently purchased a vehicle that he will be paying on for several years.
- His currently works two to three jobs requiring physical activity.
- He is in decent health, but has had increasing knee and leg pain in recent years.
- He is the sole provider for his family.
I could feel my stress level increasing as our conversation continued, but Alex seems to believe that somehow his retirement will magically be OK. “After all”, he says, “we have always managed to get by so far…so we will make it fine when retirement age comes. Besides, I am too old to create a retirement plan now, so what is the point in trying?”
Because Alex thinks he has waited too long, he has blocked the very aspect of making any retirement plans from his mind. Alex is wrong. It isn’t too late. If you, like Alex, have given up on trying, you are also wrong. No matter what your age, there are positive steps you can take today to make your retirement a plan instead of a fuzzy wish. This tips will help:
Make a plan.
Be realistic. If you cannot achieve a retirement income equal or more than your current working income, plan for your retirement standard of living to be lower than your current standard of living. And DO NOT count on Social Security to fund your retirement. It is a broken system doomed for failure.
Get out of debt.
I know. You hear this all of the time. But this one step is the simplest way to increase your retirement cash flow. Think of it like this: that $500 car payment, $800 credit card payment and $400 furniture payment translate to $1,700 a month toward your retirement income – IF you pay them off. This equates to drawing 3% annually from a $680,000 nest egg. Which is easier: getting out of debt or saving $680,000?
Pay off your house.
House debt and retirement are not good chemistry. As in the previous illustration, that house payment will be going to you instead of the bank – when the house is paid for.
Hint: if you are considering purchasing a house, plan the term of the loan to be less than the number of years before you retire.
No matter how old you are, it is never too late to start saving. Start an IRA and max out your IRA contribution limits. Whatever nest egg you accumulate will be more than if you don’t start. Besides, you will be learning a habit that you will need once retired: live on less than you make.
Plan to work part time.
What do you love to do? Start doing it part time now and save every penny you earn. Then, when you retire from your full time job, you can supplement your retirement income by doing something you love to do.
Keep working as long as you can.
Retirement does not magically happen at some arbitrary age; it happens when you can afford it. The longer you are able to work (and do the things I listed above), the better you will be able to afford it.
Don’t give up like my friend Alex. Those years will come whether you prepare or not, so take steps now to prepare.
Alex: are you reading? I hope so.
Readers: what other suggestions do you have for those who have not planned for retirement? Any ideas on how to make the Alex’s in this world wake up?