In today’s world, this concept is so scary that most people don’t even want to think about it. But if you cannot afford to retire, you must think about it.. And you must do more than think about it – you need to create definite strategies and the willingness to follow through with them.
Let’s start with this thought: your life won’t be a disaster because you cannot afford to retire. Lot’s of people never retire, some out of necessity, some by choice.
But if you cannot afford to retire, then there are some choices that you’ll need to make. As you do, understand that your life won’t be lousy just because it isn’t perfect. But it doesn’t have to be a disaster either, and that’s what we’re going to talk about here.
If you’re looking for flowery promises and charts showing you how you can attain the retirement life of your dreams, you’ve come to the wrong place. This article is about real world strategies for a real world problem.
Social Security and Medicare to the Rescue? Well, Sort Of
Social Security is a poor retirement plan. But that’s because it was never intended to be a retirement plan. It was established as a supplement to lost wages due to old age. But in recent decades, millions have come to believe that Social Security either is, or should be, a full-blown retirement plan. You know, the kind that will allow you to live in relative comfort on a single source of income.
That’s not what Social Security is, but that hardly means that it’s an utter disaster.
If you cannot afford to retire, use Social Security for its intended purpose. See it as an additional source of income that will supplement other sources. It won’t make you rich, nor enable you to retire. But it can make your old age a lot more comfortable. And it doesn’t need to fully replace the income from your job to do that.
View Social Security as an additional income stream. With your monthly benefit, you won’t be entirely dependent on a job for your survival. As well, you may be able to reduce your work schedule from full-time to part-time, which will at least enable you to semi-retire.
Medicare is another important part of the retirement years. No, Medicare isn’t a perfect health insurance plan. You’ll almost certainly need to add a supplemental insurance policy to the mix. But even if you do, it will be a lot less expensive than if you had to purchase full coverage on healthcare exchanges.
At a minimum, Medicare will enable you to have coverage without needing to hold a job. That will not only give you lower-cost healthcare than what most of the working public have, but it will also give you geographic mobility. Because Medicare is portable, you could live anywhere that you want.
Plan to Have at Least Some Money Saved for the Retirement Years
There’s a tremendous imbalance when it comes to saving for retirement. A relatively small percentage of the population have most of the retirement savings. The vast majority have little or no retirement savings at all. The middle ground here is pretty slim.
I try to be realistic about this. It’s a fact that in today’s stagnant wage/high cost of living era that many people simply don’t have the financial resources to save for retirement.
But there’s also a psychological factor. Sensing that they’ll never be able to save enough money to actually retire, a lot of people don’t even bother to try. They assess at some point in their lives that there’s little chance they’ll be able to accumulate a $1 million retirement portfolio, or even $500,000.
The financial industry isn’t helping the case either. By liberally splashing rosy retirement projections, that show people having seven-figure or high six-figure retirement portfolios in just 20 or 30 years, they test the limits credibility for people of modest incomes.
Millions of people see these ads, get overwhelmed, and simply decide to put it out of their minds.
But all negative factors aside, you need to save at least some money. It doesn’t matter if it won’t be nearly enough for you to fully retire. Anything is better than nothing.
Think of it this way…$50,000 in savings won’t be enough to retire on. But you’ll be a lot better off in your retirement years with $50,000 than if you were broke.
If you can’t go for $1 million, at least shoot for $50,000.
What to Do if You Cannot Afford to Retire – Going “Old School” with Savings
Before World War II, when middle-class people didn’t usually retire, they saved money anyway. They saved money so they had breathing room throughout their lives. But they also saved money for old age. Not the way people save money for retirement today, but for old age nonetheless.
I’ll use my grandparents as an example here. All were born well before World War II. In that generation, it was a source of pride that one would be productive throughout his or her life. There was no concept of retiring to idleness at the beach. Your work was a part of who you were, and giving it up was not something that was done lightly.
Back in those days, people didn’t save money for a golden retirement. They expected to work throughout their lives, or at least as long as they were able to. The nest egg that was saved up was mostly to provide for them during the last year or two of their lives, when they were either sick or no longer capable of working.
If you don’t have a big fat retirement plan, you need to have some sort of savings accumulated nonetheless. It may only be sufficient to cover you in your last years of life, but that will be enough. It will have to be, since you won’t have other options.
If you’re 60 years old and you have no savings, don’t give up under the assumption that it’s too late. Plan to save enough money over the next 10, 15, or 20 years so that you could survive for perhaps the last two or three years of your life on savings and Social Security.
It’s worth doing.
You Can’t Drop the Ball on This One: Get Out of Debt – And Stay Out
If you won’t have sufficient retirement income, you can’t afford to have debt. Debt may enable you to pay for things that you can’t otherwise afford, but it also dooms you to spending current and future income on past obligations. It’s a burden you can’t afford to carry.
If your retirement situation looks bleak, getting out of debt is almost certainly the single best strategy. It will free up all of your income for current living expenses, and that’s a virtue unto itself.
Sell Your House if You Need To
Do you ever see those commercials and ads for reverse mortgages? I don’t know about you, but I’ve always thought it absurd that an elderly person would borrow money so that they can “keep their home”.
Keep their/his/her/my home is the common phrase uttered in yet another attempt to justify borrowing money for current consumption. The phrase is a pure play on emotion, distilled from throw grandma out on the street. It’s also a slick marketing campaign.
Here’s a newsflash: it’s only your “home” for as long as you can afford to pay for it. If you can’t afford to pay for it, then you have to give it up. Borrowing money so that you can continue to live in it is nothing short of desperate. The very fact that you might have to borrow money to keep a house is proof by itself that you can’t afford to live there.
Another angle on this is the concept of being house poor. Have you ever known anyone in this situation? They live at or just above the poverty level, all while having a substantial amount of equity in their house.
This might be even more absurd than taking a reverse mortgage. If you’re struggling to survive, then by all means, sell your house and use the proceeds for retirement capital. If you have no other savings, this shouldn’t even be a hard decision.
A house isn’t a virtue, it’s a thing. No matter how long you’ve lived in your house, the reality is that you can live in any number of places. It doesn’t have to be your house. It can be in an apartment, or even in a corner of the house or apartment owned by a family member or friend.
Plan to Do What You’ve Always Done – Work
Today, millions of people plan their entire lives around one day retiring to a life of blessed nothingness. But there was a time when ordinary people thought of not being able to work as being “washed up”. No one ever wanted to be useless. It was thought that when you couldn’t work anymore, you probably couldn’t live either.
What’s ironic is that most people today work in occupations that are not physically taxing. Office work and many service occupations are not the type of work that grinds down a body. At least not in the same way that factory, farm, mining, or construction work did half a century ago.
Most of us have less physical need to retire than we commonly assume. What’s also interesting is that a lot of people – when forced to – actually can work well into their 70s. The idea that we need to retire is mostly a perception. Or maybe a desire, generously fueled by the media, TV and the investment industry.
If you don’t have sufficient resources to retire, then embrace work as a virtue. After all, the fact that you’re able to work means that you’re vibrant, and able to continue living your life to the fullest. That’s a positive, anyway you look at.
But at the same time, plan to change the way you work. Work part-time instead of full-time. Shift to doing work that you actually like. Start your own business. I have my own business doing work that I love, and could do well into the retirement years. Find something similar and you can literally change your life.
If you can’t retire, plan to work more comfortably than you have throughout most of your life. You might even find that you no longer have a desire to retire.
Adjust Your Expectations
This one is huge. Retirement today is perceived as a need or even a right, not as a luxury. But the reality that it’s always been a luxury. Retirement has always been for the well-to-do. And since most people are not well-to-do, most will have to accept some sort of compromised arrangement.
You’ll be able to do it if you properly adjust your expectations. Start by ditching the idea of a full-blown retirement to a life of leisure. Replace it with a mix of part-time work and part-time leisure. Embrace that as the virtue that it is – a combination of more leisure time than you’ve had most of your life, with doing work that you actually find pleasurable.
Let go of some of the toys and excesses that are commonly associated with retirement. Maybe you won’t be able to travel the world, but you might be able to travel more around your little corner of the world. And there’s no need to buy a vacation home when you can rent one from someone else for a lot less money.
The retirement years won’t be your entrée into the Lifestyles of the Rich and Famous. But they don’t need to be either. Sign up for Social Security and Medicare when the time is right, save more money for your old age than you ever thought you could, pay off all of your debts, sell your house if you need to, and develop a balance between more leisure time and continuing to work at something that you actually like, at least on a part-time basis.
Most likely, you’ll do just fine.
Do you have any other suggestions for someone who cannot afford to retire?