Thursday, March 31, 2011

Retirement Dreams 2: Can You Afford to Retire?

Some years ago, in our journey toward retirement, Bob and I attended several retirement planning workshops for those in midlife. All gave the daunting message that we couldn't retire unless we had more than a million dollars saved. Though we had fears of working until we dropped, we got serious about building our savings and eliminating debt. Our 401K's and home equity increased. Even if we weren't destined to hit the million dollar mark, we tried to get as close as possible.

Then the financial meltdown of 2008 happened: our 401K's shrank overnight and our home equity diminished significantly. And our planned retirement date was only a year and a half away!

We took a deep breath and came to a new realization: We didn't need to be near-millionaires to be happy in retirement.

What made this possible?  We took a close look at our plans and expectations, comparing our working lifestyle and our planned retirement lifestyle, deciding what was necessary and what we could live without. We felt  that our freedom was worth some lifestyle sacrifices.

The other day, we found that we were not alone in our decision process.

In response to a recent article in the Wall Street Journal about Baby Boomers falling short of the savings necessary to fund retirement, one very wise reader wrote a letter to the editor that made us say "YES! That's the secret!"

What this reader, Jerry Doane, wrote was: "The key to happiness in retirement isn't so much in maintaining your pre-retirement lifestyle, but rather in trading material wealth for freedom. Unless one has experienced this tradeoff, its value shouldn't be underestimated. One can survive quite happily in retirement on 50% or less of pre-retirement income.  The most important and most difficult step is to reduce or eliminate debt. Other things: reduce gas and clothing costs, downsize your house, furniture and possessions in general, and eating less, which is good for you. Most important is to change your philosophy from an employment-centric model to an experiential lifestyle. This will lead to gaining enjoyment from more simple pleasures. In sum, transfer the energies expended in working to the art of living."

If you're 10 or 15 or even 5 years away from retirement, still fully employed and dreaming, getting out of debt, including mortgage debt, is the best move you can make toward freedom. For most of us, that mortgage payment took the biggest chunk out of our take-home pay.  Credit card debt is another budget buster. If you can retire mortgage free and with no credit card debt, you're way ahead in your quest for freedom.

You might also start preparing for a more frugal retirement by cutting back now -- and banking the savings. You might also forego that dream of early retirement for a more traditional retirement age -- or phasing in retirement.  Bob dreamed of retiring at 62, but agreed that wasn't really practical. So he decided, with his company's blessing, to cut one day out of his workweek, starting at age 62. That day of freedom each week made waiting an extra four years for full retirement more palatable.

Some Baby Boomers, however, have faced the harder challenge of unemployment in their 50's or 60's, or have had the stress of a devastating and expensive illness, a midlife divorce or a home that is underwater.  Some are forced, by necessity, to take Social Security at 62 instead of waiting, as planned, for full retirement age.  Many have had to forfeit their comfortable retirement dreams for something much more modest, maybe something once unthinkable, like moving in with children or other extended family.

And yet, however modest one's retirement, there is real joy to be found in freedom.

Aunt Molly used to celebrate every day of her retirement by saying to herself each morning "Today is MINE!" And wherever you woke up this morning, today is, in fact, yours to live as you choose. And you may find that the simple pleasures of life -- lingering over coffee in the morning, having time to pet and play with your cat or dog, having time for a good conversation, being helpful to others with the gift of your time and attention -- are more pleasing than you could ever have imagined. Yes, there is less money coming in -- whether because of regular retirement or a retirement forced by life circumstances. Yes, your lifestyle may have changed dramatically, but that difference does not have to be negative.

Ask yourself what you really need to be happy.

Is that expensive latte you used to grab on your way to work really as sweet as the homemade variety enjoyed at leisure at your kitchen table?

Was that house -- maybe larger, maybe in a more expensive area -- any more home to you than your retirement house, apartment or shared living space?

Did you get anywhere faster in your new, expensive car than you do in your older, perhaps more modest one? And beyond a first glance, does anyone really care what you drive?

Were all those meals out when you were working and too tired to cook worth the cost in cash and calories? Now that you have the time to plan meals and cook, you can be eating in a truly delicious and healthy way.

How many of the trips and vacations you took when you were working were truly enjoyable? What did you like the most -- the destination or the freedom from the daily grind of work? As much as I loved occasional trips to Maui in my working years, what I enjoyed most was the fact that I wasn't at work. I could feel the stress draining from my body by the second or third day away. Now there is the possibility that such freedom can be part of everyday life.

You have freedom from punching the clock, from the headache of office politics, from demanding clients or bosses, constant deadlines and that feeling of never being able to catch up.

You have the freedom to work in a new field, work part-time or to do the volunteer work you were not able to do before.

You have the freedom to do nothing except relax if that's what you choose today.

You have the freedom to determine what you will do today, tomorrow and the rest of your life.

That can be empowering. It can also be a tremendous burden for some.  Some studies reveal that as many as one-third of soon-to-be retirees are worried about what they will do in retirement.  I've seen this concern in a former boss who wonders what she will do without the structure of work and the feeling of importance and being needed that she gets every day, even though her job has become increasingly stressful and unsatisfying.  She is starting to think about doing volunteer work with disadvantaged youth, inspiring them to complete their educations, to have goals and dreams.  Another friend, still grappling with what to do with her life more than a year after retirement,  is finding some satisfaction in acting as an impassioned advocate for a friend dealing with a medical crisis. For some, it may take some a while to recapture the sense of purpose and structure lost when they left employment behind.

If you're still planning for retirement, it may help to give some thought to the structure and purpose of your future lifestyle. That's at least as important as the financial considerations that tend to take center stage in retirement planning seminars.

If you're retired and feeling at loose ends, it may help to think back on passions and yearnings of the past, and plan how you might bring these back into your life today.  Or find new reasons to get up in the morning. It might mean being there for your children and grandchildren in a new way. It may mean getting in the best shape of your life. It may mean dedicating yourself to a cause or a charity. It may mean finding new comfort in the stillness of a dawning day, the option of using your newfound freedom to do for others, the delicious choices of staying up late with a good novel or sleeping in (a wonderful option, indeed, for those of us who spent years in grueling pre-dawn commutes to work) or lingering to watch a sunrise, a sunset, or enjoying a leisurely afternoon with someone you love.

As Jerry Doane said so well, our tasks today and every day of retirement are in celebrating freedom instead of material wealth, transitioning from putting our energy into work to focusing on the art of living. For each of us, the challenge is to create a life with new meaning, new purpose and joy in the simple pleasures of savoring these days that are uniquely our own.


  1. We had to learn quite a lot of this in our 50s, Kathy, when we both took early retirement on reduced pesnsion. Thankfully we had paid off our mortgage and even though I actually took a new direction and went into paid church ministry for a few years, we found and still find that the sense of freedom to do what we wanted with our time far outweighed the loss in income.

  2. Thanks, Perpetua! We found it was a matter of taming our wants and trimming our debts. You're right that freedom is so much more enjoyable than extra money or things.

  3. yes this is true. Thanks for posting. Well money can go very quickly and we cannot depend to our children so we have to save up for our Senior Living.