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Is it too late for a happy retirement?

Maybe you can relate: A reader sees retirement looming on the horizon, but she hasn't saved nearly enough. What can she do?

By Stacy Johnson Jan 24, 2012 1:16PM

This post comes from Stacy Johnson at partner site Money Talks News.

Money Talks News on MSN MoneyHere's an email I recently received from a reader who's about my age and is wondering what her retirement is going to look like. Or rather, if she's even going to have one.

Over the past couple of years, I've been working to get my financial life in order -- but I'm worried it's too late. I rent an apartment with my 13-year-old son, have no debts, have $4,000 in my emergency fund, and a work 401k with $35,000 in it. It doesn't sound so bad, except that I'm 57 years old. According to my calculations, I'll have to work until I'm 70 years old and live to 84. Do you have any suggestions or comments?
-- Susan

The first comment I'll make, Susan, is that you're in a crowded boat. I'm more or less in the same one, and I'll bet there are plenty of people reading this who are, too.

How did we get here?

When my father passed away a few years ago, he had been retired for close to 30 years. Despite the fact that he never made more than $50,000 in a single year, he was never short of cash in retirement. Between military and civilian benefits, he was bringing in nearly as much retired as he made working: $45,000 a year. And because he lived a very modest life in a place with a low cost of living (suburban Atlanta), he saved more of his retirement income than he spent.

His son, on the other hand -- yours truly -- faces a much different future. Having been self-employed for more than 30 years, the only pension I'll be getting is from Social Security, and the only other income I'll have is what I can generate from my investments and retirement accounts. Unlike my dad, nobody but me is contributing to my retirement. I don't have a company pension or anyone matching my retirement plan contributions.

I also have another problem: I don't live in a low-cost area. The property taxes alone on my modest Fort Lauderdale home are 10 times what my father paid -- enough to consume one-third to one-half of my expected income from Social Security.

Of course, I made this bed myself. I chose where I live and what I do for a living. But millions more find themselves in this situation because of something they couldn't control. Namely, the replacement of traditional company pensions (called defined-benefit plans) with the retirement plan more prevalent today (called defined contribution).

Defined-benefit pension plans are like Social Security. They guarantee a monthly check for life. You can't outlive the money, and the risk of having enough set aside is the company's -- not the employee's. In my father's day, these were common and funded by the employer. Defined-contribution plans, on the other hand, shift the burden to the employee. These plans -- think 401k -- have no guarantees and are largely funded by you.

Result? You contribute as much as you can afford, then hope the market doesn't melt down on the eve of your retirement and that your balance is enough to keep you comfortable for the rest of your life. If it isn't, that's your problem, not the company's.

According to this 2011 study from consulting firm Towers Watson, in 2002, 83% of Fortune 100 companies provided defined-benefit pension plans. Today that number has dropped to 30%. That increases the likelihood that, with each passing day, more people will be in this scary boat. Post continues below.

What can we do?

While I do have a lot more saved than Susan, depending on what happens and how I choose to live, it still might not be enough. For example, if interest rates stay this low, generating an adequate income (at least safely) from my retirement savings will be tough. That leaves me with one or a combination of the following choices:

  • Radically reduce my cost of living when I retire, perhaps by moving to a lower-cost home here in Fort Lauderdale or somewhere else.
  • Accumulate as much as possible now, then pray for considerably higher interest rates on low-risk accounts by the time I retire.
  • Keep working past traditional retirement age.
  • Supplement my retirement income by spending my principal, then hope I'm dead before it runs out.
  • Take a measured amount of risk with my retirement savings to create more.

These are my choices, and Susan's as well. And what she and I will do is probably a combination of all of them.

All of us -- Susan, you and me -- need to put as much money aside as we possibly can. How?

  • Spend less, save more. One way to spend less and save more is to create a savings goal, then find the money to reach it by creating a spending plan, also known as a budget.
  • Pay less interest. Since paying interest on debt steals money we could be saving, we need to get rid of it.
  • Save smart. When it comes to making our savings work as hard for us as we do for them, we need to learn to take an acceptable level of risk. We also need to get the highest interest possible on our savings.
  • Make more. Since what you make now will influence what you'll have later, get the highest pay you can. See "The 5 best ways to make more money."

Susan also recognized what may be the only true solution: "work until I'm 70 years old."

While that may sound depressing, it doesn't have to be. Because in an ideal world, none of us would be "working" at all.

Unlike my dad, I love what I do, which means I don't "work," at least in the sense of doing something I hate in exchange for money. If I win the lottery today, I'll still be sitting here tomorrow. Granted, I certainly want to work less as I age, as well as have the ability to not work at all if I choose.


But what we all should be seeking are careers that keeps us coming back for more, especially if retirement looks murky. Because if you use every trick in the personal-finance book and still won't have enough to retire, doing something meaningful and rewarding is the only way your later years will be golden, both physically and emotionally.

I wish I could provide a magic bullet -- a simple solution that would guarantee that those approaching retirement without sufficient savings could lead the life they've worked for and deserve. But finding work they love may ultimately be their only salvation.

More on Money Talks News and MSN Money:

Jan 24, 2012 6:06PM
Definitely agree on getting rid of all your debt asap.  This alone can make a very big difference on whether or not you cross the finish line in good standing.  Think of debt as as a double-whammy against you, you pay money that basically goes into a black hole instead of using it for something you will need or to gain interest yourself.
Feb 1, 2012 5:43PM
Learn to live beneath your means, save more than you think you should, buy used cars, treat your house as a home instead of a commodity to be sold for a profit  and don't try to keep up with the joneses.  I realize it's too late for many boomers but those younger people looking here should take heed.  YOU are the only one that can provide you and yours with security.  Rely on the government and you will be screwed.  I'm 65, just retired and living as described above has paid off for me.  Now  I can say it was worth it.  
Feb 1, 2012 3:20PM
I agree on the advice: must keep working.  What alternative does one have?  But happy to keep working by finding work you love?  That's the most unreal suggestion in this article.   How many people can find work that they LOVE that PAYS?  That's a total fantasy.  There are a lucky few out there that make a good living off of work that they love.  The rest of must just do something, even if we don't love it, and MAKE THE BEST OF IT!    In today's world, people are lucky to even have a job, any job, especially as you get older, much less one that they love. 
Feb 1, 2012 3:28PM
Of course save, but the most important issue is the practice of learning to live on very little.
Feb 1, 2012 4:05PM
Well thought out and written. My wife and I have military and teacher's pensions to add to social security so we feel like future cash flow won't be a problem. However, I always seem to want more and am reluctant to go ahead and retire. Eventually I'll make the move. I worry about my descendants and how much $ they'll need to make it. That probably keeps me working extra. Definitely tougher to safely retire now than it was from 1950-2007.
Feb 1, 2012 5:36PM

So, this is an absolute waste of space. Find a job you love may be your ultimate salvation?? Um, OK, great. Now, consider that, realistically, probably 90% of all jobs fall outside of the realm of lovable. Tolerable, sometimes enjoyable, but certainly not lovable. But you know, that's OK, because WORK isn't supposed to be 100% enjoyable - if it were, it'd be called PLAY. So is your advice useful to the majority of us?? Hell no!

Feb 1, 2012 4:10PM
Hey wizzywig:  I feel your pain but you just have to figure it out. Lot easier if you like farming, etc,  or are a professional athlete. Lot harder if you are on the assembly line, or a cop/firefighter. Self employes is the way to go. Admittedly, I have not done it that way........
Feb 1, 2012 6:15PM
Be nice to your kids, you may need to move in with them.

Mar 2, 2012 4:26PM
Life's a beach and then you die!  What a great country we live in..yada yada daba do!  I retired at age 59.  My healthcare insurance alone is $990 a month and climbing.  I spend almost $12,000 a year on healthcare insurance premiums.  Then add prescriptions drugs, co-pays, etc.  The company I worked for kept adjusting the pension promises down until I ended up with a miserly $1300 a month.  Lucky me.  That barely covers my health care.  Everything else gets paid out of savings.  Eventually Medicare will kick in and social security will start to pay but that's still 6 years away.   Between auto insurance, electricity, food, gasoline, cable tv, and internet, it cost me approx $2000 a month to do absolutely nothing with all my free time.  At least I'm no longer contributing to the CEO's multi-million dollar pension with my blood sweat and tears.  I should have become an air traffic controller back when the President fired all those striking workers.  I hear they now retire with 75% of their salary and health care.   What was I thinking?  Computers.  The work was too hard and the pay too little it turns out.   If you are 57, and only have 35K in the 401K, plan on working until at least full social security.   However, you really got  to down size and find some way to supplement what little that you get from social security cause it ain't going to be enough!  And remember, you still got to cover 20% of your medicare  health care costs.  That means if you have a heart attack (that you survive) and the hospital bill comes to $100K, then expect to get billed $20K.  It seems to me that the conservative elite have been pulling the wool over our eyes for decades.  Now that retirement approaches for many, the government is scrambling around trying to figure out how not to pay for it!  Good luck.  And, I did find what I like doing most.  It's nothing!  At least I can still afford to do that for the time being anyways.

Feb 1, 2012 8:59PM
10 Years too late for a "Happy" retirement for me!  Now it's just one of those retirements where you spend your last dollar and hope you die on the same day!Confused
Feb 1, 2012 7:18PM

How is it that you've been in the workforce for 30+ years and all that you have to show for it is $35k???  I'm 29 and I have more than that by not even saving that aggressively.  And I live in the Washington DC area, which is a hell of alot more expensive than Atlanta or Ft Lauderdale. 


I'd also say check your calculations.  No way in hell you're going to retire at 70 if you're 57 now w $35k in retirement, unless you inherit some money or plan on dying when you're 72. 

Mar 2, 2012 4:34PM
Everyone here pointing a finger at who's to blame for their lack of retirement funds is pointing  it in the wrong direction.  It all comes back to the individual.  You plan the best that you can and hope. My goal was to be completely mortgage and debt free. I made it,  although I had to work until 69.  But, I  haven't had to adjust my (modest) life style at all.  No pension.  Just SS and some saved funds.  The main thing my wife and I are thankful for is our good health so we can enjoy retirement. 71 and trucking.
Mar 2, 2012 5:55PM

My husband and I will be retiring in 49 months when he is 55 and I am 53.  Whenever I think about retirement I thank my parents and my husbands parents for being such a good influence on us.  They taught us to live within our means, pay ourselves first and work somewhere you get a pension with lifetime medical.  At first, at 22 and 21 we did not think it was a big deal. At that point it  was more attractive to spend money and have fun things like a nice car and various other toys.  Shortly afterwards I can remember just being happy to have medical insurance and pay the mortgage. Then we began to realize having that pension and medical was going to be a phenomenal asset and bonus to expedite our retirement.   There was the realization about 20 years ago that our parents were right and if we planned appropriately we'd retire young like they did.   That is when I put the 25 year plan in place and, thankfully, my husband agreed to it and supports it 100%.


We make a combined income of approximately $152K and we owe nothing on credit cards and our home is nearly paid off.  We live in a high cost area and the basics like homeowners insurance and taxes will take a chunk out of our retirement, but we continue to plan to live within our means.  Having all the toys in the front yard and working until 70 was never appealing to us.  Paying cash for college for our kids, however, was.


On top of our pension we've saved $450K into a 403b (and will still save another $100K before we leave) and it is my hope that we never have to touch it so that our children can inherit it.  Unfortunately the youth of our nation will probably never have the same opportunity we did to find a job where there is a guaranteed retirement income let alone lifetime medical.


What I am about to say next will certainly draw some attention because this puts us into a small percentage of people preparing to retire.  We unfortunately only have my mother left, but my father, mother in law and father in law have passed all passed away.  We my husbands parents died he inherited over $800K and property from my in-laws.  We have yet to spend a penny of the inherited money.   We have multiple friends who are in the same position and have bought fancy new cars, lavish vacations, remodeled their homes or put in pools.  We just don't feel that it is right to frivolously spend money that they worked so hard to accumulate.


I am mostly writing this because I just can't see how young people today can possibly hope to retire at 55 let alone 70.  People who work around me, but are 10 - 15 years younger do not own a home, have no retirement savings, and need every penny they earn to support their lifestyle.   This is before they have even started a family.   My hope for them is to get out of debt and start paying themselves first.  You just need a budget to get started. 


We tell our kids all the time how important it is to plan for your future.  I hope that we've made an impact on them like our parents did on us.  They will likely inherit a lot of money, but they have no clue and we've told them that it is their responsibility to make it on their own.





Feb 1, 2012 5:57PM
It's not the republicans who screwed things up. The democrats always want to raise taxes to spend more of my hard earned money. Then they tax my ss because I did without a lot during the time I worked and put my raises into my 401k. 
Feb 1, 2012 6:04PM

You think the republicans are destroying retirement? Our country is going bankrupt from all of the goverment sponsored pensions, union pensions, and social security, and medicare. These programs were designed at a time that a worker would retire and pass away within 5-10 years. Now people are collecting pensions for 30-40 years. Not sustainable! These are all programs which were started by the democrat party. There is no way that we can fiscally maintain these programs when the the number of workers per retiree is declining. It is logistics and the bounty which we have experienced is the past is just that- a thing of the past. We are going to have to learn to take care of ourselves and live within our means. That means to purchase needs and not wants- not everybody "deserves a vacation". There is no more golden goose.

Feb 1, 2012 6:06PM
Yes, Susan, you'll need to work until you're 70 at the least and hope you don't fall down dead on the job before that!   I'm just glad that all of the upcoming retirees are at last going to realize the fulfillment of their dreams when they voted for Ronald Reagan.  Yes, he promised "morning in America" by starting the process that reduced or eliminated defined benefit plans, fostered a philosophy of layoffs to achieve corporate profits, encouraged Americans to accumulate those signs of wealth that they could show off to their friends like oversize houses and BMW's, and demonized the poor ("welfare queens") and elderly.  Americans, you are getting what you wished for when pulled that lever for Ronnie.  Now enjoy it!  And enjoy working till you are 70--that is IF you can find a job!  How can Americans work until 70 if 14 million of us remain unemployed amid cries to stop government spending which can, in its way, stimulate the creation of other jobs.  I'm glad to see that the President is at last taking the Republicans advice and slowing down government spending on the military industrial machine.  Now all those Republicans in heavy defense industry states will now get their dreams realized.  Let's face it 2012 is the year that all of America's long-held dreams come true!   Happiness is here at last.
Feb 1, 2012 4:46PM
We have allowed the government, namely Republicans, to destroy the ability to have a good retirement in this country.  The 401K replaced pensions and was created as a way for Wall Street to get access to people's retirement cash and gamble with it.  Just look at your 401K statement from last year and see how little you added to you nest egg.  At the same time they make it harder for people to accumulate the necessary amounts to retire, the Republicans are looking to destroy Social Security and medicare.  Retirement will be a thing of the past soon...we will work until we die or until we can't...and if you can't, you will be in poverty.  So much for retiring with dignity.   
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