A Layman’s Look from Don: Streams of Retirement Income, Pt. 7

by Donald Whelpley
@ 2022 All rights reserved.

PART 7

Streams listed in previous Articles:

  • Social Security (Spouse’s SS)
  • Pensions
  • Traditional Retirement Accounts (IRA, 401k, etc)
  • ROTH IRA
  • Annuity
  • Non-Retirement Accounts
  • Marketable Collections
  • Part-Time Work
  • Rental Properties
  • Reverse Mortgage

The next Stream is VERY IMPORTANT, particularly as you are preparing for retirement.  The question is: “Where am I going to get extra money to pay off loans and/or save up?”  When your kids move out it is time to re-assess your lifestyle.  The future you does not need the same “STUFF” your past you needed.  It is time to have those 2-week yard sales and huge clothing donations.  You are never going to use those roller skates again (or should not).  Get rid of the crap.  Clean out the garage and shed.  Start stabilizing the paint in those rusty paint cans so they can be land-filled.  

We also sorted through our towels and linens (potholders, dishtowels, and rugs) and found “ugly” ones.  (Why were we saving the “ugly” ones and using better anyway?)  We packed the nicest ones for retirement and started using the worst for everyday.  When one became unusable it went to linen heaven and we pulled out the next “ugly” one for everyday use.

Stream 11: REDUCE EXPENSES.  

This is a BIG & POWERFUL tool.  Every retiree has some way to reduce expenses.  Find SOMETHING to eliminate in order to do those things you really want to do.  I will share several examples…  

– Example 1:  REDUCE OVERHEAD.  Sell the lake cottage that has become a burden, offload that ’57 Chevy you never got around to restoring, and cancel that seldom-used membership (Netflix, music-streaming services, gym or golf membership).  Remember that after you retire you may not need that “going to work” car anymore.  Less can be MORE.

– Example 2:  EVEN SMALL ITEMS CAN BE BIG.   Here are just two small items I found:  a) Trash service.  A smaller dumpster costs $25 less per year.  b) Home phone.  I had a cell phone and a VOIP home phone.  Maintaining the home phone contract costs $195 per year.  $220 savings does not sound like much until you realize that taking that money out of a traditional IRA would have meant an additional $36 in state and federal income taxes.  I can leave that $256 in my IRA this year and next year and the year after that.  At 7% annual growth I will have $3,541.60 more in my IRA in 10 years.  That is nearly a dollar per day saved/earned by eliminating 2 small items.

– Example 3:  MOVE.  We were living in a high property tax area, our auto insurance premiums were hurtful, and our water/sewer bills felt like we were using precious metals.  We moved to an area where all were reduced.  Property taxes got a 15% cut.  The auto insurance premiums dropped by 60%.  The water/sewer bill was reduced by 35% for the same amount of usage (Odd thing was that our previous water meter said we were using twice as much water as we do at our new home…but we have  the same low-flow devices and appliances and our habits have not changed.  How is that possible?  So we were over-billed there as well.)   These things added up to a huge annual savings.  It was worth the move.  I recommend you do a bit of research to see if another town or state could give significant savings.  Stay out of California or New York states if you want financial sanity.

– Example 4:  ELIMINATE DEBT.  If you are able, pay off your mortgage, credit cards, and car loans BEFORE you reach retirement.  44% of retirees still have a mortgage.  41% have credit card debt.  35% have auto loans with balances exceeding $14,000.  You are less likely to be financially secure while paying interest.  In fact, interest payments impoverish many retirees, robbing them of the freedom to travel and enjoy what they have earned.  Eliminate this money waster.  Plus, (THIS IS BIG), if you are in debt AND one of you needs Medicaid assistance you could lose your house, your car, or go bankrupt because you may not have the cash in hand to make the payments.  It is very important to become debt-free BEFORE retirement.  
Further, your personal debt may become the spouse’s debt when you die.  Some loans must be paid in full upon death.  That could be devastating to your spouse’s financial situation.
In spite of the myriad ways it has been taught, many have failed to appreciate the fact that no human can SPEND his way to wealth (apparently, governments can?).  The only sure way to be wealthier next month is to spend less than you earned this month.  Simple.

– Example 5:  DO AN ENERGY AUDIT.  Any home repair or new appliance which reduces utility costs and pays for itself in less than 9 years is likely worth the investment.  Sometimes even checking and adjusting the refrigerator temperature can pay off.  

Example 6:  SMARTER PURCHASES.  You will be living in your home for a long time retired.  Do not buy inferior products.  Quality appliances, windows, doors, and furniture last longer.  Without a salary you should resist the urge to splurge on gadgets (large holiday displays for your yard, as an example).  You cannot replace money you waste.  Make purposeful purchases.  

Is there a downside or risk associated with reducing expenses?  Yes.  Sometimes you have to spend money now to save money long-term.  However there are no downsides to eliminating waste and debt.

NEXT WEEK IS THE FINAL SEGMENT.  If you learned something you did not know before, let us know.  

See Part 1 of A Layman’s Look from Don: Streams of Retirement Income
See Part 2 of A Layman’s Look from Don: Streams of Retirement Income
See Part 3 of A Layman’s Look from Don: Streams of Retirement Income
See Part 4 of A Layman’s Look from Don: Streams of Retirement Income
See Part 5 of A Layman’s Look from Don: Streams of Retirement Income
See Part 6 of A Layman’s Look from Don: Streams of Retirement Income

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