Working as a newspaper reporter in my 20s in South Africa, I encountered many people with sad life stories. Some of the most heart-wrenching situations involved mature people who had lost some or all of their hard-earned savings, either through poor savings and investment choices or by being preyed on by evil people. And, worst of all, these people were too old or sickly to genuinely have a hope of finding work to make up for the losses. Being old and poor in a country without a safety net is not for sissies. These scenarios left a deep impression, spurring me on to spend inordinate amounts of time on figuring out how to save enough money to cater for my retirement. Yet, as the years have marched on, the goal of financial independence continues to appear elusive. I have lost money in disappointing investments, been hit with unexpected tax bills, found myself scraping by to put my children in private education and have generally experienced the job of saving for the long-term a case of one step forward and two steps back. I’m not alone. And, while I am not in my 60s and might have some time to regain lost ground, I worry about getting to the point when I have to stop working. The Wall Street Journal tackles the widespread fear of retiring without enough funds. – Jackie Cameron
___STEADY_PAYWALL___
Youāre in your 60s and havenāt saved enough. Hereās what to do.
ByĀ Glenn Ruffenach
(The Wall Street Journal) – My wife and I are in our early 60s and, for various reasons, havenāt saved enough for retirement. What are your best suggestions for pumping up our nest egg? We already plan to continue working into our mid-60s and, if necessary, beyond.
Well, letās start on a positive note: The fact that youāre asking this question means, presumably, that you have sat down and tried to calculate whether your savings and other sources of income (e.g., Social Security) will allow you to meet your expenses in later life. All of which is more than many people do.
Soā¦ the following steps are some of the best ways to āpump up.ā None of these are easy, but each is doable. And each can help anyone approaching retirement, including those who are confident their finances are in good shape.
ā¢Ā Keep working.Ā Yes, this idea leads most lists. Itās fine advice, and Iām glad itās part of your thinking. But, as we have noted several times in this space, planning to work isnāt necessarily a guarantee of work. A recent report from the Transamerica Centre for Retirement Studies found that more than half of retirees (56%) retired sooner than they had anticipated because of layoffs, ill health and family responsibilities, among other reasons.
In short, working longer can be a smart strategy to bridge gaps in retirement savings. But you must have backup plans, as well. Which leads us toā¦
ā¢Ā Slash debt.Ā Got a costly auto lease? Get rid of it. Swamped with credit-card bills? Cut up the cards. Older Americans, improbably, are accumulating debt instead of eliminating it. In August, the Federal Reserve Bank of New York reported that individuals in their 60s held $2.16 trillion in debt as of June 30, an increase of 62% just since 2007 (the beginning of the 2007-09 recession) and almost five times the amount of debt ($440bn) held at the close of 2000.
The math is simple: If youāre carrying too much debt, you likely canāt save enough. And if you arenāt saving enough, a secure retirement will remain out of reach.
ā¢ Get ruthless with expenses.Ā Several years ago, I spoke with a small-business owner who admitted that he really had no idea how much he was spending until his wife all but demanded they sit down and discuss their finances and future. As it turned out, a year earlier the couple had spent $8,200 on their five dogs and $4,000 on wine. āNow we have a monthly meeting,ā the husband said, āand my wife tells me, āThis is what we have in savings, this is what we have in the checkbook.ā ā
The point: Donāt lie to yourself. Yes, lots of people have a household budget of some sort, but do you know where the dollars are actually going? Dining out? Movies? Gifts to family members? Pets? Hobbies? Gambling? Travel? Electronics? You might be able to take an ax to more costs than you realise. Speaking of whichā¦
ā¢Ā Downsize.Ā I know: a tough step. But letās look at some numbers.
Even if your mortgage is paid off, taxes and upkeep on a home can still put a sizeable hole in your wallet each year. Given that annual property taxes nationwide average about 1% of a homeās value (according to the Tax Foundation) and annual maintenance and utility bills average from 1% to 3% (a good rule of thumb, according to financial advisers), carrying costs alone on a $500,000 home total about $15,000 a year. Move to a $350,000 home and the figure drops to $10,500.
Of course, downsizing isnāt foolproof. Depending on where you move, a smaller home could end up costing almost as much as your current residence. Even so, you should begin to see savings in other areas: less money for heating and cooling, for a new roof, for yard work. And those savings will compound over time. Smaller also can be practical. As one retiree told me: āYou come to grips with the inevitable, that you canāt maintain a big home forever, physically or financially. Itās bound to get more difficult.ā
