Ten thousand Baby Boomers are retiring each and every day. That’s going to be putting a tremendous strain on our already tapped out Social Security system, as well as Medicare. Don’t you think? According to many, many financial experts, they have advised that in order to properly retire, you have to have a few million dollars under your belt. I’m certain that many of those tens of thousands of retirees did not do that. How do I know? Because I’m one of them and I never even came close to saving a million dollars.
First off, I calculated that if I lived frugally, I didn’t need a few million dollars tucked away before I could officially retire. What I did need, however, was a long term plan. Let’s get honest here. With the high costs of living, buying a home, raising a family……….do any of us really have a lot of money left over to save? My husband and I never really earned a lot of money. So, I figured out, very early in my life, that if I am ever to have any semblance of order or an affordable retirement, I had to sharpen my pencil and get right down to figuring out what I was going to do. Since it was nearly impossible for either of us to ever earn a lot of money, I calculated that only by lowering our expenses and overhead, would we ever be able to afford anything.
I would say that my frugal talent developed at a very early age. Both my parents, despite being multi-millionaires, grew up during the Great Depression. The theory that worked well for them (but not for me) was to be self-employed, invent something unique that the whole world wanted but couldn’t get elsewhere and work 20 hour days for many, many decades. I decided that their route to wealth and riches wasn’t for me. How, thought I, could I get the same type of lifestyle my parents enjoyed without the sweat, effort and price tag?
I utilized the Depression-era techniques I gleamed off my parents AND grandparents and constructed a teenager’s frugal lifestyle that has kept me afloat for fifty years. It took a long time for frugality to become hip, chic and cool. I went through many a growing up period subjected to ridicule, but in the end, I think it was worth it. Nonetheless, thrifty financial management is all the rage today. So much so, that it has now crept in to retirement lifestyles. People are just finding out that that if they just lower their living expectations, flaunt only when necessary, they too can afford to retire along with the best of them. Without the sweat and aggravation.
As I said previously, you have to have long term planning. You have to ask yourself what you want. Or, as in the words of Jeff Yaeger (the Ultimate Cheapskate) “What do you really, really want?” I knew as a child how I wanted my life to be. I envisioned what my ending would be like at the very beginning, so I planned accordingly. I knew my key to early retirement would be a mortgage-free home and a debt-free life. Those two factors made it very easy for me to live on less. I calculated that smaller is more affordable. So, I ALWAYS drove a small car, rented a small apartment, bought a small home, took small vacations, had a smallish-sized family, bought little things (such as 19 inch TV’s vs 60 inch, etc.) The smaller the cheaper but the bigger the impact. I was able to have it ALL, but just a bit smaller version of ‘all’. In my case, size mattered but not in a pre-conceived way.
I knew I wanted to travel and see Europe, but I did it while I was still working and bringing in an income. I couldn’t travel today as I traveled back in my youth. I also knew I wanted to see much of America from the back of an RV. Young people don’t do that, so I left that part of my plan for when I really retired. Next year, DH and I will be getting a compact RV (just built for two and our dog) and will start our ‘See America and Canada Tour’. We plan on being beach bums during the winters, visit Niagara Falls in the spring and for one year drive cross country.
My original home was to be mortgage-free by the time I turned 59. I never borrowed against the equity and let the home build up my retirement money. My financial obligations to my kids ended when they turned 18. They were responsible for their own college tuition (so they worked summers starting high school freshman year and saved for 4 years in order to pay their own college tuition). I also did not pay for their weddings. One eloped. The other had an official bash. Once the youngest left for college, DH and I sold our home, at the height of the housing boom (lucky us) and we downsized. We had enough money in equity to re-locate to a less expensive area, buy a smaller home without a mortgage, pay off all debts and buy two brand new cars (to last for at least 10 years apiece). Eventually, we will downsize to one car, which again will be brand new. As you get older, you do NOT want to do your own repairs. New cars and extended warranties have turned out to be very cost effective for us.
As it turned out, because we sold our home nine years earlier than planned, (for varied reasons) I was able to retire at 50 vs 59. DH continues to work (part time). Without financial obligations and debts, DH and I used this opportunity to finally save money towards our retirement. Is it allot? Compared to the experts advice, no. We have a net worth of about $700K (give or take). Suze Orman would probably give me a C minus. Both the experts and Ms. Orman think people don’t have the capabilities of living a frugal lifestyle. Well, if you want a jet-set retirement, complete with luxury European travel, and unlimited pro-golf, then the experts are correct. But if you just want to sit back, relax, embrace DIYing, cook your own meals, enjoy life and take it nice and slow, frugality just may be your bag.
As it stands now, (calculating in inflation and modest increases in medical costs) DH and I could survive on our Social Security payouts alone. That’s a very good rule of thumb. Our savings is our back-up. That’s what we will use for the RV, local travel, an eventual new car and/or unexpected costs, including medical expenses. Most experts advise the opposite. They want you to rely on your retirement savings and use your Social Security as a supplement. They may try to scare you and tell you Social Security may not be around forever. I doubt that very highly. Maybe payouts will be reduced or retirement eligibility may be raised, but either way, you will be getting something! Calculate what your payouts will be and use the time needed to aim towards living off that goal. OR continue to work and slave and scrimp and save and work 20 hour days like my parents did for decades and decades. And pay for Georgetown educations and weddings at the St. Moritz. Only to see your children get divorced and drop out of medical practice fifteen years too soon.
Worry about yourself. I hear too many stories of my fellow retirees who must now move in to their children’s basement because they sacrificed their own lives for the wrong things and are broke. Embrace frugality and figure out a way to live your best life possible.
And so it goes.