Approaching Retirement Totally Not Ready

Lieutenant General Lewis B. “Chesty” Puller is credited with saying “We’re surrounded – that simplifies the problem”.He wasn’t referring to someone approaching retirement with minimal savings, but the concept is appropriate. You are in your late 50’s or early 60’s and your savings are minimal or non-existent. You no longer have options. So, in some ways, life gets easier. Whatever you do to improve your situation is a step in the right direction.

Were you alone in your situation, there would be little need to write this article? But regretfully, you have many friends sharing your situation. GoBankingRates conducted a major survey of millennials, Gen X’ers, and boomers plus seniors. They asked a simple question ‘How much have you saved for retirement?’ Highlights /lowlights of the survey are as follows:

• 56% of all Americans have less than $10,000 saved for retirement. One third have saved nothing. Another 23% have less than $10,000.
• Women are 27% more likely to have zero savings. 63% of women surveyed stated that they had less than $10,000 in savings. The comparable number for men was 52%.
• Savings rise with age.
• Gen X’ers were hit especially hard in the Great Recession (2008-2009). This generation lost 45% of their net worth during this time.
• Only 1 in 4 people ages 55 or older has more than $300K saved.
• 3 in 10 respondents age 55 or older had no savings. Of those that had some savings, 26% of the remaining 70% reported less than $50,000.

For some boomers and seniors, employer pensions may be their primary source of retirement income. For everyone else, pensions are mostly limited to public sector jobs and history books.

Moving Forward

Henry Kissinger noted‘ The absence of alternatives clears the mind marvelously’ If you have saved little, and you are running out of years before retirement, the answers become increasingly obvious and imperative.

Pay off debt – You cannot go into retirement with credit card debt, car loans, and anything more than minimal mortgage debt. Car loans and credit card debts are not deductible even if you could itemize in retirement. People struggle to earn 2% to 3% above the rate of inflation over their lifetime on their savings. Credit card debt may run 8% to 15% or more above inflation. It must become the number one priority.

Plan on Working Longer – There are three very good reasons for this.

• Every year you continue to work is another year less you need to fund in retirement. Let’s assume you knew when you were going to die. To keep the math easy, let’s call it 90 years old. If you retire at 65, you need to fund 25 years in retirement. If you retire at 70, you cut that time by 5 years or 20%.
• You gain time to save. You may not save a lot in those additional years, but something is better than nothing. You want to make every effort to save during the last years of working, but even if it is 5% of your salary, it is more than nothing.
• You can afford to defer collecting Social Security until 70. At age 70, you receive the maximum benefit. It grows every year you defer from age 62 to 70. After 70, there is no benefit to waiting. You MUST start collecting at age 70 or you are just leaving money on the table. If Social Security is going to be the biggest contributor to your retirement portfolio, you need to collect the maximum if you possibly can.

Cut Your Budget

If you are approaching retirement with minimal savings, the time has come to get serious about buying what you need rather than what you want. The double soy latte has to go. The top of the line cable TV package has to go. Some of the subscription services you may have acquired need to be terminated. The fleeting pleasure you may enjoy today may save you from genuine poverty in years to come.

Start an Active Savings Program

As you downgrade your cable TV channels and internet speed, put that money away. As you substitute a coffee at the office for that store bought coffee every day, save that money. When you decide not to go to dinner in favor of cooking at home, bank that difference. Get used to saving money. Make it part of your lifestyle like feeding the dog.

Sign up for Medicare

Part A is free. It pays for hospital care. You earned it. If you sign up 90 days before your 65th birthday, it will start on your birthday. If you sign up after your birthday, your start date will be delayed up to six months. You can hold off on the rest of Medicare until you retire if you are covered at work. But you need to get Part A done on time. If your health insurance at work is minimal, Medicare may be significant cost savings for you.

There are other steps that someone can take as they approach retirement. These require a bit more effort but can be very rewarding.

Consider a Reverse Mortgage

Reverse mortgages were once uncommon and poorly regulated. That is no longer the case. If you can qualify for a reverse mortgage, you may want to look into one. Take your time. Get educated. Do your homework. This is not a decision one wants to rush into.

Consider Relocating Somewhere Less Expensive

This ranges from leaving New York or New England for Florida to moving to Belize, Mexico, or some other place warm and inexpensive. For those considering relocation to a place with no family or friend ties, we advise taking a long vacation to try out the area first. For those venturing overseas, make sure your Social Security checks will continue. This is not true of all places you may go.

Consider Turning a Hobby into a Small Business

Whether you raise rabbits, write stories, cook, or have another hobby, see if there is a way to turn it into a part-time job. The money will buy a lot of extras and help you to fill the days.