An acquaintance in her early 60s was proud that she had saved $100,000 towards her retirement. In her case, it was a terrific accomplishment, since she’s a single mom with moderate income. She asked me for suggestions to help her plan her retirement.
Immediately l heard two opposing voices talking in my head. One voice knew how hard she’d worked to save that much money and wanted to congratulate her. The other voice was screaming, “That’s not enough!”
She has a lot of company—she’s one of millions of Baby Boomers who haven’t saved enough money to retire full time at age 65 under their current standard of living.
After a little thought, the first voice won out, congratulating her out loud and acknowledging how hard she worked to save that much money—there was simply no point in discouraging her by saying she should have saved more.
Then I shared that she would need to take steps to squeeze as much retirement income as possible from Social Security and her savings, and she’d need to reduce her living expenses as well. The following strategies would help afford her retirement:
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- Continue working as long as she can, hopefully to age 70 or even longer.
- Since most of her retirement income will come from Social Security, she needs to make it as large as possible. To do that, figure out how to delay starting Social Security for as long as she can, but no later than age 70 (there’s no financial advantage to delaying beyond age 70).
- If possible, keep saving as much as she can towards retirement.
- Take the time to learn how much retirement income she can reasonably expect from Social Security and her retirement savings.
- If she understands how much retirement income she can expect, then she has a target for reducing her living expenses. Start looking for ways to reduce her spending now, even before she retires.
- Look into ways to deploy her home equity, which has more value than her retirement savings.
- Within six months of reaching age 65, start learning about her options for Medicare and supplementary health plans.
If she can’t possibly continue in her current job, then I encouraged her to find work that she enjoys and could continue indefinitely. If necessary, she might take a cut in pay if that could lengthen the time she continues working. She should consider this move part of her retirement plan.
Another important part of her retirement plan is to look for a “win-win-win” solution for the best place to live in retirement that offers these advantages:
- Frees up home equity that can be reinvested to produce retirement income,
- Reduces her ongoing housing expenses, and
- Better meets her lifestyle needs in retirement.
Finally, I encouraged her to take every possible step to improve her health so she can keep working as long as possible. The research on healthy longevity suggests that this means eating well, keeping her weight at reasonable levels, exercising regularly, getting enough sleep, and expanding her social portfolio. The bonus? These steps will improve her enjoyment of life—both now and long into her retirement.
I finished by acknowledging that none of these steps would be easy and that she has her work cut out for her. But I also noted that seeing how resourceful she was by saving $100,000, I had every faith that she could do it!
When most people are faced with tough challenges, deep down they appreciate the truth and authenticity. Then they can make a realistic plan that addresses their situation, which will give them confidence to face the future. A little encouragement can go a long way!