I have been overwhelmed by the amazing amount of support I’ve received for my new book, You Can Retire Sooner Than You Think. There’s an interesting question, though, that I keep getting from reporters and, more importantly, real people that I meet with and run into in my day to day life.
The question goes something like this, “I like your book and the lessons you share for a happy retirement, but let’s be honest… that’s really just for ‘rich’ people, right? A 60 year old with no savings and some debt could never meet the financial minimums you talk about.”
Just as a refresher, these are the financial minimums I gleaned from my national survey on happy retirees:
- $500k in liquid savings (401k, IRA, ROTH, Investments accounts, savings account)
- Peak Income Year (before retirement) of $97,800
- 3 separate sources of income in retirement
- A mortgage that is paid off by retirement age
Based on the above minimums, it’s easy to see why people ask this question. It’s one that I have thought about a number of different ways. The “financial minimums” in the book are simply derived from my survey data. Although they are statistically significant as they relate back to happiness in retirement, I also understand they will be unrealistic if you’re already behind the eight ball in age and savings.
As an advisor to my clients, I have certainly seen hundreds of retirees that are extremely happy but who fall well below many of the financial minimums in my book. I even write about one of these couples in my book. Simply put, everyone has an opportunity to be a happy retiree.
If you’re in a situation where you’ve got few assets and maybe even fewer years before retirement age, here are three keys to becoming a happy retiree… without necessarily checking every box in my book.
Accept the reality of your situation, reset your expectations, and get to work.
Every able-bodied person has the ability to get to a point where they don’t have to work 40 or 50 hours per week. Not everybody has the opportunity to retire to their second home or sailboat in the Keys, though, and that’s okay.
This principle from Chapter 4 in my book applies to everyone: you need to figure out your core pursuits and feel confident about your purpose in life. This isn’t about money – it’s about happiness.
If you are 60 years old today and have a regular working history, you can expect about $1,100 per month in social security at age 62 and $1,700 per month if you wait until age 66 to tap your benefits. These are your new expectations and baselines for living in retirement.
If your mortgage isn’t going to be paid off by your desired retirement age, it’s probably time to relocate to a place you can afford to pay off quickly.
A mortgage obligation can be a great way to build equity in a home when you’re young and working. As you enter retirement, though, you don’t want to be house rich and cash poor. Remember – with your social security benefit as your new baseline for monthly expenses a $1,000 or $2,000 mortgage payment will essentially eat up all of your cash flow if you stop working.
Find a neighborhood that has the characteristics you like, but for a price you can really afford. As an example, the median home price in Metro Atlanta is 44 percent lower than the median home price in the City of Atlanta. There are even certain suburbs that are much cheaper than others. It’s also worth remembering that you don’t have to be concerned about the school system in retirement which can swing your cost of living significantly.
Stop acquiring and start shedding
This applies to everything from credit card debt to trinkets. If you still have credit card debt, get on the Dave Ramsey program to getting debt free. Stop spending $30 and $50 on little things you probably don’t need. If you don’t have it by age 60, odds are you don’t really need it (see Economic Shutdown in Chapter 10 of my book).
Cut up the credit cards, have a yard sale and simplify your financial and spending life. If you don’t owe anybody anything at the end of every month, you’re well on your way to a happy retirement at any asset level (see the Rich Ratio in Chapter 2 of my book).
A happy retirement is all about your personal perspective. The guidelines in my book are relevant data points, especially if you have the time to get started on meeting those objectives at a younger age. If you don’t fit that mold, though, hopefully the above three steps can help those of you in the later part of your working careers jumpstart a happy retirement.
Wes Moss, the Chief Investment Strategist for Wela, writes a weekly blog for AJC.com. You can find his original article here.