Retirement is something everyone seems to look forward to. But the reality of that retirement may not be as idealistic as we dream.
For many of the “Baby Boomer” generation, our retirement fund consists of whatever we’re going to receive from Social Security and nothing more.
When it comes to retirement, most of us are worse off than our parents’ generation was.
So Why Is This So?
First of all, our average tenure working for a company is less than five years, meaning that we’re not even minimally vested for retirement. That’s a huge difference from our parents’ generation, where many worked for a company for 20 or more years, and then went on to work another 10, 15 or 20 years for another company.
Secondly, we’re notoriously poor at saving for retirement. More than half of us have no savings whatsoever when we retire. Averaging the entire population we barely reach $200,000 in retirement savings and investments when it’s time to retire.
Finally, our biggest “investment” our home, doesn’t have the equity value that it should, because we tend to move before paying it off. The average time a homeowner spends in their home is eight years; and that’s actually up from a decade ago. Only 37% of homeowners have been in their homes for more than 10 years.
If you look at any amortization schedule, you’ll see that unless real estate prices have increased drastically in the city where the home is, the amount of equity only equals about 15% of the cost of the home. What this all means is that most of us can’t really afford to retire.
Personally, I’ve worked in a variety of fields, including engineering, being an overseas missionary and now as a freelance writer. Although I worked long enough to be vested for retirement at both of the companies I was an engineer for, I only have retirement coming from one of them, as I cashed out the other one to start my own business.
The other company’s retirement fund will be paying me a grand total of $112 per month, when I reach retirement age in a few short years.
It’s not that I wasn’t a good employee, by far. I was an excellent employee. Between those two companies, I garnered a total of five promotions in 15 years, going from junior technician all the way up to engineering manager. I’ve also been successful in my missions work and my writing career, although I can’t say the same for my earlier business ventures.
I know; I know; I should have been putting money into a 401K all those years I was a missionary and self-employed. That’s an easy thing to say; but a lot harder to do, when you barely have enough money coming in to make ends meet. So, while I might be able to look back and tell myself “You should have,” it wasn’t a practical reality at the time.
So what am I going to do? For that matter, what are all the other “Baby Boomers” out there, who are in a similar situation going to do?
Since few of us have savings worth speaking of or any retirement coming from the companies we worked for, how are we going to keep a roof over our heads and food on the table when it comes time to retire? Allow me to throw out a few possibilities.
The easiest thing to do, in order to make sure that you have enough money to live on, is to just keep working. If you’re able to do your job now, what’s to keep you from doing it a few more years, until your health makes it difficult?
Staying on the job for that extra time may help to increase the retirement you receive, when it does become necessary to retire. Of course, not all companies are willing to keep older people on the payroll.
There’s a definite move towards companies trying to have a younger workforce, mostly because they can pay those younger people less money.
So your company may actually push you into retirement. But even so, that doesn’t mean that you have to retire; you can always go to work someplace else.
Going to work someplace else may mean reinventing yourself and changing what you do, at least to some extent. That may mean becoming a consultant, especially if you’re highly skilled in a very specific field.
Companies don’t usually mind older consultants, because there’s a natural tendency to believe that those older experts have lots of years of experience.
An alternative way of handling that is to join the gig economy and work from home as a freelancer. Companies pay billions of dollars per year to freelancers, to do a wide range of tasks.
Many of these companies are smaller ones, who don’t need a full-time staff member to do that particular task or who have that particular skill set.
Hiring freelancers allows them to hire the expertise they need, without having the financial burden of a full-time employee.
I’ve been a freelancer for 11 years now and I have no intention of stopping when I reach retirement age. Oh, I’ll probably slow down a bit, becoming more selective in the work I accept. But I’ve been at this long enough that I’m already pretty selective of who I work for and what jobs I take on.
But that’s not the only thing I’m planning on doing. I’ve always been an entrepreneur, either as my full-time job or as a sideline. I’ve also been a bit of an inventor, having an engineering background.
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So I’ve got a couple of projects in the works, which I’m hoping will grow into small businesses, essentially making products from recycled material. If those work out, they’ll be able to augment my retirement income at least to some extent.
The other way I’m reinventing myself is to turn my hobby into a sideline business. I’ve been a woodworker all my life, and as I’ve grown older, my projects have become more artistic.
I’m currently working on “building my brand,” making upscale handmade wood products and turning my hobby into a business. This will help me to cut down on my writing hours, doing something I enjoy and still being able to make money off it.
Lower Your Cost of Living Now
If you know that your retirement income and your living expenses don’t match up, then just maybe it’s time to change your cost of living. I don’t mean waiting until you retire to do so; I mean doing so now, so that by the time you retire, you’re already living within your means.
My wife and I just bought a house in a small town near here.
While it might seem a bit strange to buy a house when you’re reaching retirement age, interest rates are low enough that our house payments are lower than a comparable sized rental.
They’re actually on par with what we’ve been paying for a small apartment and two storage units, one of which was my workshop.
Based upon our combined income, we could have qualified for a loan that was twice what we ended up spending on our home. But that wasn’t our goal. Rather, our goal was to find something that we would be able to afford in retirement.
By buying a house in a small town, we saved $100,000 over buying it here in the city and we ended up with a much bigger lot. We literally own ¼ of a city block, giving us room for a larger vegetable garden, raising chickens and putting in a fish pond.
It may not look like it makes sense, but downsizing can save you a lot of money, especially if you can do like we have and downsize to a lower cost of living area at the same time. Housing and energy are typically our biggest expenses, so going for a smaller place might be all you need to do, in order to make your retirement budget work.
I’ve always done a lot of things for myself, rather than paying others to do them for me. That includes everything from cooking to remodeling projects to replacing the engine on my car. It’s a great way of saving money and has allowed me to live above my income, simply because I’m not paying someone else to do things that I can do myself.
Part of that is that I’m adding solar power, wind power and solar hot water heating to our home. While I don’t expect to power everything that way, I hope to cut our electric bill by 10 to 20 percent. I’m also hoping to grow all our own produce, cutting down on our food bills.
Move In With Your Kids
Once upon a time, it was normal for grandma and/or grandpa to move in with their kids, when they couldn’t make it on their own anymore. They’d help around the home in whatever way they could, contributing to the family. While we don’t do that so much anymore, it’s a tradition worth bringing back.
When my first wife divorced me, my youngest daughter and her husband invited me to move in with them. That was fortunate for me, as I couldn’t pay my ex the amount of support I had to (while waiting for the divorce to finalize) and still have enough to live on.
But it also allowed them to move into a bigger place, as I was contributing to the household income. So we weren’t crowded in their original home.
Now that I’m remarried, that same couple is asking when my wife and I are going to retire and move back in with them. They want us there, especially now that they’re having their first baby. We get along good and really don’t have any of the power struggles of two couples living in the same home.
Live Like You Did In Your Youth
If you don’t get along well enough with your kids, so that you can move in with them, perhaps you could do what many of us did in college or in the years thereafter and get a roomie. My brother, who is a year older than me and is already retired has a roommate that he’s lived with for several years now.
They were buddies in high school and have managed to maintain their friendship through their various marriages, divorces and living out of state.
Living alone when you’re retired probably isn’t a good idea anyways, especially if you’re single. Not having anyone there when you fall or have health problems can be outright dangerous.
On top of that, there’s the problem of being so alone. We need social interaction to survive; and having a housemate or apartment-mate can help provide that social interaction.
So, those are my ideas. As you can see, I’m already working on several of them, even though I still have a few years before I reach retirement age.
I’m not waiting till the last minute, as I figure it will take some time to prepare. Which ones of those will work for you?
Or do you have any other ideas that will work to make retirement financially possible? If so, I’d love to hear them. Maybe your idea will make my own retirement a little bit better.
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