Our retirement planning advice is based on a mix of setting realistic financial goals and a little common sense
There are two practical solutions to the stressful problem of not having enough money saved for retirement—and neither involves banking on a big stock windfall.
These days, more investors suffer from what you might call “pre-retirement financial stress syndrome.” That’s the malady that strikes when it dawns on you that you don’t have enough money saved to be able to earn the retirement income stream you were banking on.
Some investors in this situation ask us if we can supply one last can’t-miss trading idea that can make up for the shortfall in their savings (brokers sometimes refer to this as a “rescue stock”). This, of course, is unrealistic. If we could find stocks with that rare combination of low risk and high potential, why would we ever recommend anything else?
Bringing your portfolio safely into retirement
Relax. You can get clear, simple guidelines on planning and enjoying a successful retirement. You can benefit from our experience in the day to day work we do building wealth for our Successful Investor Wealth Management clients.
We’ve put that experience into one comprehensive guide for you—”12 Steps to the Retirement You Want.”
In fact, if you’re heading into retirement and are short of money, you should move your investing in the opposite direction: in this case your best investments are safer investments. They’re a far better option than taking one last gamble.
Here are two practical solutions to a pre-retirement money shortage. The funny thing is that either one can improve your quality of life in retirement, in addition to your finances.
The first solution is to work longer. Put off retiring from your current position, or continue to work part-time. Or, find full- or part-time work in another field. To start, this can solve a common problem that many retirees fail to foresee: how hard it can be, and how much it can cost, to fill up all the free time that comes with retirement.
Many retirees admit that they fill this time by giving free rein to Parkinson’s Law (“work expands to fill the time allotted for its completion”). Some find that minor tasks take over their lives, so they never get to tackle the more fulfilling projects that they’ve put off until retirement, such as learning another language, taking courses, organizing a stamp collection or whatever.
A part-time job, paid or volunteer, gets you out of the house and provides contact with other people. Many studies suggest these two fringe benefits can prolong your life and keep you healthy.
The second solution is something you should begin before you retire. You start by doing a detailed study of how you spend your money now. Then, you analyze your findings to see what personal expenses you can cut or eliminate. This too can have fringe benefits, especially if it helps you break unhealthy habits.
For instance, a friend decided years ago that he could no longer afford to smoke cigarettes in retirement, but he couldn’t bear the thought of quitting. So he compromised with himself: he quit smoking what he referred to as “tailor-mades”, and switched to “roll-your-owns” (which were less heavily taxed and way cheaper than ready-made cigarettes).
The rigmarole of rolling his own immediately led him to increase the time between cigarettes, and this cut down his total nicotine intake. Eventually he quit smoking altogether, after having tried and failed many times during his working years.
Smoking is less common today, of course. But cutting out fast food can save the average Canadian anywhere from hundreds to thousands of dollars a year. In retirement, you’ll have time for a cooking class or two, and soon you’ll be able to cook better-tasting and healthier food than you can buy at any fast-food chain. The cost difference between home cooking and fast food can be substantial, and it’s like tax-free income.
Turning frugality into a game is sound retirement planning advice
These two retirement tactics may come hard or easy to you, depending, in part, on your upbringing. People who come from humble circumstances often develop a degree of both frugality and industriousness early in life.
Finding part-time work while in school, and making every penny count, becomes a game for them.
It’s easy to let frugality evaporate in mid-life, when money becomes more plentiful. But some find that if they return to frugality later in life, it’s more fun than ever. It’s a little like taking pleasure from a game that you haven’t played since you were young.
Your enjoyment of, or distaste for, frugality is partly a matter of attitude. But that’s under your control. Don’t think of it as penny- pinching. Think of it as taking charge of a part of your life, so that more of your money goes to things you choose.
Are you faced with the possibility of not having enough money for your retirement? What strategies are you using to get the most in your retirement savings ? Let us know in the comments.
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I found when I did a spreadsheet projection of my income and expenses to 100 years (at age 50 or so) it gave me a lot of relief from those worries. Just like Pat says, figure it out so you know, replacing that vague terror of not having enough with a real plan.
Also, now that I’m retired, I’m spending at least $5K/year less than I anticipated. I’ve been pretty frugal all my life – not to the point of penury – and I don’t feel any pull to spend more now.
I am lucky to have a small defined benefit pension, and of course CPP and OAS when I reach 65, and I’ve picked up a part-time job that interested me. I’m using a lot less of my investment income than I expected.
I now realise that I could have stopped full-time work a year or two earlier.
Excellent comments. Retired year and a half ago at 65. Pat’s comments bang on and really resonate. Thank’s.
One of the best ways to save money is to stop eating and drinking in your car. If you know that you need something on your trip, make a coffee or a tea before you leave home and pack a sandwich. Do not go through the drive through.