FLOATING thru RETIREMENT
May 9, 2024 article by Lorie Konish was at CNBC and had some interesting facts. She reported, for example that …
4% of retirees say they are “living the nightmare financially.”
15% say they are “struggling.”
and another 34% are “not great, but not bad.”
To summarize, 43% of retirees are under water, treading water, or on a slowly sinking boat, which is fine as long as the bilge pump lasts. That is a very high percentage. When you consider that about 5.6 million people retire this year, that means 2.4 million of them will retire poor.
In the article, Ms. Konish also reported the top four concerns of those who are retired:
Inflation
Health Care Costs
How to draw down assets
Outliving assets.
I would add a few more financial concerns from those with whom I have spoken have:
Tax increases, rising cost of electricity dependency, failure of Congress to address the Social Security shortfall, poor executive short-term decisions to fund illegals and student loans without solving either long-term.
All seniors feel that they should not have to pay for other people’s failures, and they vote.
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What can you do to make sure YOUR retirement boat will float?
1. DELAY signing up for Social Security benefits. Avoid too early or too late. Signing up at 62 is a bad plan unless you are un-well. The “sweet spot” for most retirees is between age 64 and 67. You are likely to live long enough to beat the system and you can enjoy the extra money at an age where you can still travel.
2. INVEST NOW, invest tons of money, invest regularly. If you don’t know where to invest consult with a financial planner. But don’t put all your coins in the same basket (You should have some IRA/401k, some Roth, and some personal investments.)
3. PAY OFF ALL LOANS. No one should enter retirement with loans. Pay off your credit cards, then your cars, then work on paying off that house. Save up money for the next car or large purchase and avoid credit like you would if you knew it was cancer, which it is.
4. REDUCE OVERHEAD every way possible. Immediately. Examine every expense you had last year (pull out those credit card statements and your bank statements). Write down every expense you no longer need (Subscriptions, Cable, Beer-of-the-month-club, daily Coffee Hut trip, etc.) Rid yourself of those burdens and use that money to pay extra on your loans. Once your loans are gone, use that money to pump up your savings. [Pennies count. I just changed my trash pick up and am saving every month.]
5. ASK FOR A DISCOUNT. (My least favorite.) See if you can get a discount for using cash or check over using a credit card. More and more places will. Others might if you ask. You could save 2-4%. On larger ticket items (new sofa for example) that would be $40 to $80. Hey! They just paid for your fancy lunch!!!
6. MAKE IT SMALLER. If you are nearing retirement you probably don’t need that new full-size pickup or that swanky Mercedes. Think smaller and less expensive. A few thousand saved here will pay you back in big dividends every year you own it. In my state cars are taxed as property. So, owning a $40k vehicle vs a $75k one will save 47% in annual automobile taxes. It is easier to pay off. It also will probably cost less to fuel and insure (even if it is an EV).
7. MOVE. A smaller house on a smaller property costs less to heat and air condition, property taxes could be lower. Less to mow. You need to plan for old age once the kids are gone. Make sure it doesn’t have a ton of south-facing windows that go from floor to ceiling. If you’re careful you might even choose a property in an area with a lower tax base or lower electricity costs. (My parents’ house was only 10 miles from where we lived, yet their property taxes were 18% lower for the same value home. That is huge in retirement. On the other hand, we had the luxury of moving to another state for retirement where the winters are kinder and auto insurance was 40% lower. Gas prices in the town we chose are almost always lower than in the nearby city. Plus, we get a senior citizen discount on property taxes. Plus, plus, plus, and plus. It was a no-brainer.)
8. PAY ATTENTION TO INFLATION. Even if you don’t plan for it … its going to happen. Your favorite $5 burger and fries deal won’t last. Don’t be fooled by the crazy idea that “now that inflation has been reduced prices should drop.” Inflation put the price there and unless there is negative-inflation (deflation) the price won’t drop. But you really don’t want that to happen. Plan for an average of 3.2% inflation per year. Plus, understand this … (something they don’t teach you in school) … inflation COMPOUNDS. You should never just multiply the average inflation by X years … you will have a nasty surprise in 15 years if you do.
9. TALK, since CRAP HAPPENS. You and your spouse need to be on the same page. It does no good for the wife to deprive herself of a needed new winter coat while the husband blows $35k on a bass boat. At our house, I keep track of finances and I even keep the books for my wife’s business. On a MONTHLY basis we talk, we look at upcoming expenses, and talk about how tight or loose the budget is. WHEN YOU RETIRE CRAP WILL HAPPEN! Expect that finances will not be smooth sailing. When we were recently hit by a huge unexpected expense, we huddled on the issue and chose the “the best way” to handle it. We could pay on time, or pay it off. Paying on time would cost a bundle in interest so we bit the bullet, reduced unnecessary expenses, and paid off 90% of it over 3 months.
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In July I have something I am writing for Independence Day. I like to invite others to share their creativity from time to time. If you have a poem, artwork, or a writing which fits Independence Day please submit it to Owly’s email (label it for “July 4.”) She has some standards for submissions. I am not in charge of her site, I’m merely a guest.
[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms and won’t see whatever you’d like to share with him if you post it elsewhere.
ALSO, Don is always open to offer his thoughts on various topics. If you have a specific request, you can let him know in a comment; he reads – and replies to – them all. ~ Sherry]
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