It’s Never Too Late to Create an Agreeable Retirement
By Shane Flait © 2009

If you’re a Boomer or fast approaching retirement age but you’re far behind in retirement savings, don’t give up. You can still pull together a retirement that you can enjoy. With perseverance, planning, and sacrifice, you can retire in relative comfort even with a late start.

In this article I show you how to set up a strategy for achieving a good retirement by maximizing your retirement income and minimizing your living expenses.  

Maximizing Income:

Retirement income generally comes from social security benefits, a company pension, your savings, and, perhaps, some part-time work. Many defined-benefit pensions have gone by the wayside, replaced by defined contribution plans. These you may consider as part of your retirement savings.

Check what you expect for Social Security benefits at the Social Security website. Get an estimate based on your full retirement age (probably 66) and then again if you delay receiving benefit until you turn 70.

To beef up your savings for your retirement, you’ll need to save more and save longer. These days you have some 30 years left after you reach 55, and 20 when you reach 65. So there’s plenty of time for growing your savings under tax-advantaged investments. You’ll maximize your savings for as long as possible.

So while you’re working, contribute as much as you can to savings. In 2009 you can contribute $6,000 a year to an IRA if you’re over 50. Contribute to a traditional IRA to knock down your income tax. Always contribute the maximum allowed to your company plan.

If you’re self-employed, you can create an SEP IRA - a retirement savings account designed for the self-employed. You can contribute much more than you can to a traditional IRA. It can be as much as 25 percent of your self-employment income (after deducting your SEP IRA contribution) up to a maximum of $44,000 (for 2009). Again, by making such contributions, money normally lost to taxes is, in part, redirected to your savings.

Start living more frugally too, so you can save more than just what you can contribute to your IRA or company plan. As an example, a 65-year-old with just $50,000 saved who puts off retiring for three years and saves $500 a month during that time could have $78,000 by age 68, assuming a hypothetical 7.5 percent annual return. Higher savings means higher savings income during retirement.

Whatever you invest in, be sure to keep 60% of your portfolio in equity-based funds, 30% in income-based funds, and 10% in cash equivalents such as a money market fund.  Keep your equity and income-based funds well diversified.

You can increase your Social Security income by postponing it. Delaying it will qualify you for significantly higher payments. If you put off taking benefits beyond your full retirement age, your Social Security income will increase anywhere from 5.5 percent to 8 percent per year until age 70. That can help a lot.

Minimizing Expense – now and forever

There’s no doubt that saving more means sacrifice. So you’ve got to rearrange your life to survive and enjoy yourself – but always on less! Remember, money doesn’t buy happiness. Yes it takes some to get by, but not as much as you might have thought.

Start envisioning a philosophy of living on less. Discern what really is important for producing happiness for you. Drop all the frills and superfluous expenses. Work on your health by doing exercise and eating a healthful diet. This will pay off now and in your retirement years.

Get out of debt now since it drains your ability to maximize savings. Trade down your auto and house for a healthy reduction in living expense. Doing this while you’re working will increase your savings and help you form a new less expensive approach to living – and enjoying life.

If you’re still low on income when you retire, you can make your money go further by moving off-shore. Go to Panama, Mexico, or some South American country like Ecuador. The cost of a house and general living expenses are a lot lower. You can live well on about $1000 per month. 

If moving offshore is a possibility, consider looking into where you might go while you’re still working. Develop the skills and knowledge for where you decide to go- and that can include learning Spanish. Doing so will make your life enjoyable there.

Happiness is cheaper than you think.  

 

Shane Flait is a writer and educator. See more at www.EasyRetirementKnowHow.com