I’ve been thinking about retirement again and have concluded that, absent some fairly serious changes in financial habits, it’s not going to happen for me at 65.
A recent issue of The Kiplinger Letter said that us Baby Boomers weren’t saving enough toward our retirement and our entire generation is facing destitution. Already depressed by the Kiplinger piece, I read a retirement planning story in the Charles Schwab magazine, Investing, which showed a simple calculation for estimating how much you can withdraw from savings and safely avoid running out of money over a 30-year retirement.
It’s not nearly enough.
According to the Schwab story, a retiree can begin withdrawing 4% of retirement funds annually and be reasonably sure of not outliving the money. So for every $100,000 of investment funds, I can expect to withdraw $333 a month forever. Let’s say that I’ve accumulated a healthy portfolio of $250,000. Then my monthly income would be $833. That won’t exactly support me in the style I’ve become accustomed to.
Well, there is one piece of the puzzle I’ve left out — Social Security. Now, assuming that my monthly Social Security benefit would be around $1,600, my new retirement income becomes $2,433 a month, or $29,000 a year. That looks more like the starting salary for a recent college graduate, not an old guy with expensive hobbies.
Ah, I could sell my house and invest those funds and have more spending money. I overlooked the equity in my house as a source of retirement income. And, that’s a viable option until I realized that if I sold my house I wouldn’t have anywhere to live. And, even if I got $100,000 for the house, that would only produce another $333 a month and then I’d be living under a bridge on Interstate 20.
This is not a pretty picture, but it is a realistic portrayal of the financial situation that many of my generation are facing. The problem is we’ve earned plenty of money and we spent just about all of it on “stuff.” Oh, how we love our big cars, fancy houses and expensive toys. Unlike our Great Depression scared parents, we’ve lived through the greatest economic expansion in the history of the world and saw no reason to worry about tomorrow.
What to do, what to do…
So, what can we do at this late date? Start listening to Dave Ramsey and follow his advice to get out of debt and stay there would be a big step in the right direction. Socking away money every month in some investment vehicle is also sound advice.
This might be painful since paying off debt means buying less, and banking some coins for the future means delaying gratification, which is not a strong suit for Boomers. Downsizing a lifestyle takes courage and determination, and I think it unlikely that many Boomers will do what is required to get financially prepared for retirement.
So, what are some other choices? Since our children show little interest in our moving in with them, that’s really not a choice. In years gone by, it was expected that the children would care for aging parents in their declining years. But, that was in years gone by.
Ultimately what’s going to happen is that Boomers are not going to be able to retire at age 65 or even soon thereafter.
We’ll work on until 70 or, more likely, about 75. By then we’ll be too feeble to enjoy our toys and our lifestyle will naturally downsize to an affordable level as we waddle through our final years.
Oh well, retirement’s probably not all it’s cracked up to be anyway.
Postscript from August 9th
A reader from Forest, Hugh McMurphy, called my hand about an omitted landmark in my recent column on revitalizing old Highway 80 from Clinton to the Pearl River here in Jackson.
Mr. McMurphy asked how I could have failed to mention the old Redwood Inn restaurant with the antique guns hanging on the wall and great coffee and pie.
Mr. McMurphy, I do remember the Redwood Inn.
My father used to go there regularly after his shift at the General Electric plant and would occasionally take us kids by for pie and a Coke. I, too, marveled at the guns on the wall and stuffed animals in the showroom window. Thanks for bringing back yet another fond childhood memory. You got me red-handed.
Thought for the Moment— When you are younger, you get blamed for crimes you never committed, and when you’re older, you begin to get credit for virtues you never possessed. It evens itself out. — journalist I.F. Stone (1907-1989)
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at firstname.lastname@example.org.