I Can’t Afford To Retire: Essential Tips On Filling The Gap

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I was on Reddit r/PersonalFinance last week, I was just browsing when I came across this  quote:

“There’s no insurance, no loans for retirement.”

If you’re short on cash to retire, well then you’re just SOL.  Straight up, prepare to be homeless if you don’t have family to help you out or are unable to continue working through your 60s and 70s.  It’s a rude awakening for so many of our elderly population.  I see older homeless people all the time and I wonder, “Why???”

When I think of my own retirement, I think about living in Florida, poolside somewhere in some assisted living luxury community.  I don’t think about the reality of just trying to keep my food costs down so I can pay the taxes on my house and not end up homeless.

The truth is that so many American families are living hand to mouth, check to check, that they are forced to decide between eating and saving for the future.  Where is the extra disposable income they can put in their 401K or IRA?

Here are some things to consider when trying to build a retirement fund.

Social Security Will Not Be There:

There are still some people holding on to the idea that Social Security will be enough. STOP IT.  There is not enough social security.  It is a Ponzi scheme.  And to be honest, to be a real conspiracist, Social Security’s main role is no longer to provide financial support for the elderly and other people unable to provide for themselves.  I mean, maybe that was never the purpose.  Social Security and their designated numbers are a means to track you for tax collection purpose.

I work with many elderly people to get them apartments and when I see their social security statements, I can’t even consider that income for the purpose of qualifying them for the apartments.  It’s a pitiful amount.

The other day my client Jenn had 1.4M between annuities, 401K and other investments.  She was sharp, I could tell she had been working her whole life.  She was earning $819 dollars a month from Social Security!  Try living in NYC with $819 a month, you wouldn’t last a week!  This is someone who probably paid into Social Security $100K+ over her lifetime and now when its time to collect she’s getting $819 a month? Something isn’t adding up…

Start Early.

Everyone tells you this but OMG this is the best and greatest financial advice anyone can give you.  At 18, nobody’s really thinking about their retirement.  They’re thinking about the future, “what career path will I choose, what will I major in at school?” But even putting $100 a month towards your retirement is a HUGE jump start.

I played around with a retirement calculator and here’s what I found:

When I was 18, I was working a shit job selling pretzels at Auntie Annes, working minimum wage.  I was lucky if I earned as little as 600-700 a month in pocket money.  If I started putting $100 a month into an IRA or 401K from the age of 18- 67,  I would have roughly $500K saved by the time I’m ready to retire.  And that’s ASSUMING, I don’t increase my contributions as my earnings increase over the years.  Not enough to retire.  But not a bad figure to start with.

Now let’s consider someone a little older:

Life got me good and I had all these expenses, children, a mortgage, an expensive marriage, an even more expensive divorce.  I wasn’t able to get it together until I’m 40 to start saving for retirement.  I would have to contribute $500 a month at the age of 40-67 in order to have roughly $500K saved by the time I’m ready to retire.  But that’s still not enough to retire with and at 40, time is no longer on my side.  I’ll need to double down and make monthly payments of $1100.  That’s the only way I can save enough so I have at least 1M available when I want to retire at 67.  I still don’t think that’s enough to retire on but you can work with that.

Moral of the story: If you’re able to start young (most people can) and save a modicum amount, you are still in a much better position than someone who is older and needs to play catch up.  Compound interest is a bitch like that.

Get a Side Hustle:

Money doesn’t grow on trees.  If you don’t have the money now to set aside for retirement, when will you?

“If you always do what you did, you’ll always get what you got.”

In this type of scenario, somethings gotta give.  You’ll need an additional source of income.  A lot of people reading this now are going to start shaking their heads thinking, “I don’t have money and I don’t have time.”

Well, make time because old age don’t feel so good when you’re broke.  The time to make a move is when you’re young and capable.  It might be hard, it might be challenging but side money is the kind of money you can put ASIDE for retirement.

Here are some ideas on low cost ways to make money:

  • Uber- Drive and get paid.  You already have your own car so thats already taken care of.  Keep track to mileage, maintenance and gas costs.  Hustle for tips.
  • Work a 2nd job.  Any job.  Work at the McDonalds across the street.  Let your kids hang in the seating area quietly if there’s no one to watch them.  Don’t worry if you get fired, it’s only a side job, so speak up for what you need and hustle until it works  for you.
  • Blog and Youtube- this is actually a very long process to build income off of.  I would only recommend this if you have the time and the means to do this.

Mortgage vs Retirement vs Kids College

The truth that none of the other retirement gurus really are able to touch on is that  99% of us will only be able to makes so much money in our life time.  Most of us are on a fixed income of salary and paying off fixed expenses.

A lot of us are still paying off student loans, we have mortgages, car payments, insurance costs and the list goes on and on.  This is just a reality for most Americans.  There might be some left over to save, but is it enough?

Probably not.

In this case it’s important to prioritize the most important needs first.

Mortgage- when deciding to buy a house, there are so many factors to consider. I’m not going to go into buying vs renting, that’s for another post, but here are my top tips on how to make sure the mortgage burden does not overtake the other financial responsibilities.

  • Live in the cheapest, smallest apartment you can comfortably manage. Of course you wanted the nicer and bigger house in the better neighborhood but you need to really consider your reasons for wanting that home.  Is it ego?  Is it an expectation you had for yourself?  Is it maintaining the lifestyle you had as a child?  It’s time to reconsider and evaluate your expectations. Times have changed, money don’t flow like it used to.
  • Only consider a more expensive neighborhood if it means a better school district for your children.  And even then, consider a cheaper neighborhood with the option of a good private school.  Compare the costs.
  • Small is good.  You can dress up small.  Trust me, I’m a real estate agent in Manhattan.  There’s no such thing as too small.  I’ve actually seen some charming 400sqft studios!  But more importantly, small is cheap.  You don’t need the extra bathroom, it’s just more space to clean.

Retirement: As I discussed earlier in my post, retirement is the main priority.  Make it so. Focus on maintaining a retirement fund that will at least allow you to maintain the same quality of life you’re used to.

Kids College: As someone who had to spend 12+ years paying student loans, I don’t think I want my children burdened with that same issue.  At the same time, I don’t think it would be fair for me to burden my children with my living costs if I don’t have adequate retirement funds.  Paying for the kids colleges is the least important financial concern you should have. It’s nice if you can afford it but the kids can take out student loans or go to community colleges, there’s no loan for retirement.

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To cut to the chase retirement is something we need to think about NOW.  Pensions and social security are out the window. They can be considered supplements but not a fall back.  Make efforts to educate yourself on what you need to do to meet your financial goals.

Wishing you the best of luck!

Check out my other posts:

Flashpass to Retirement: FiRE and LeanFiRe Strategies

Why I Budget and How to Budget: Personal Finance In A Nutshell

Motivational Book Club: The Total Money Makeover by Dave Ramsey

 

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