February 22, 2017 — A lot of baby boomers are facing a very difficult retirement. The Employee Benefits Research Institute’s (EBRI.org) 2014 survey reported only 55% of retirees are very or somewhat confident they will have enough money to live comfortably in retirement. A Topretirements.com survey was even less optimistic; only 46% of our Members said that their expected retirement income will allow them to continue their pre-retirement lifestyles.
The Wall Street Journal recently profiled a baby boomer in this situation who took a surprising solution to solve the problem – “With $15 in the Bank, A Baby Boomer Makes Peace with Less (article might be behind a paid wall). Kathleen Wolf lived in the San Francisco area until recently. During her working life in real estate she made – and spent – a lot of money on fancy cars and big houses. But when the time for retirement came her savings and income just weren’t there – in fact at one point her bank balance was just $15. After she filed for bankruptcy, staying on in expensive Monterey, California, wasn’t going to be possible. Read on to find out how she coped with her reduced circumstances.
Think out of the box
While Kathleen’s financial ups and downs are more extreme than usual, there are millions of boomers in the early stages of retirement who have very few resources other than Social Security (average 2016 monthly benefit – $1348). Whether it is a result of poor planning or plain bad luck, this is not a good situation to be in. If this describes you, it is time to take drastic action. Here are some of your options – and we can’t wait to hear other suggestions from our Members:
1. Do what did Kathleen did – move to a Iowa, a state with much lower housing prices. Kathleen moved to a small town in Iowa, a state she never imagined living in. Sounds radical, but the difference in price in amazing. The Zillow Home Value Index in Monterrey was $725,200 recently, whereas in Des Moines it was $121,900. Kathleen’s condo wasn’t worth what a larger home was, but she did have a positive cash flow. If you are fortunate enough to have home equity in one of the hot real estate markets in the USA, you can trade that for a great home and still put quite a bit of money in your retirement savings account. Almost anywhere in the interior of the country is a lot less expensive than on the coast. For that matter, even Central Florida is way cheaper than along the Atlantic Ocean or Gulf of Mexico.
2. Downsize now! Even if you are not retired yet, get out of that big house you might be living in. The extra dollars you spend every month for taxes, utilities, maintenance, etc. could be going right into your retirement savings account.
3. Share a House. Do you have a relative or a close set of friends you think you could live with? If so you can create your own co-housing community, although of course you must choose carefully and set up legal protections. It might not cut your housing expenses in half, but it could come close!
4. Move to an unconventional house. Manufactured homes are usually very good quality and far less expensive than traditional “Stick-Built” homes. Mobile homes are about the least expensive type of housing you can buy, often available for $10,000. Many are in really nice communities in great locations (e.g.; there are many such communities in Jensen Beach, FL.), but be careful about places where the annual lot rents go up significantly every year. The Tiny House Movement (also known as Pocket Homes) is very popular with homes sized less than 1000 sq.ft, even as small as 80 sq.ft.!
You can usually move tiny houses from place to place, which is a big advantage. Finally, why buy a house at all? In some parts of the country you might be better off renting. Or buy a big RV and travel around the country with the seasons. There are lots of ideas if you look around.
5. Be part of the Sharing Economy. Lots of millennials survive by participating in the sharing economy – and you can too. Drive on Uber, rent out a room in your house with Airbnb or HomeAway, or get part time work with Taskrabbit (there are many other sites that do the same thing). You can pet sit, run errands, do minor repair work – the higher your skills the better the pay. Work when you want to and earn enough to avoid a drastic downgrade of your lifestyle.
6. Work longer and save more. If you are still working and your retirement savings are meager, don’t quit! The Social Security longevity credits you get by delaying to age 66 or even 70, and every extra dollar you save, will make your retirement that much easier. The median couple in their late 50s or early 60s has saved only $17,000 in a retirement savings account according to the Economic Policy Institute. That amount is not enough to fund a retirement, obviously, as even a 3% annual distribution would amount to a paltry $510 per year!
7. Pay off your debts before you retire. OK, this is not really an out of the box idea, but it is still a really good thing to do. Everyone in retirement will face unplanned emergencies – medical, home or car repairs, or family. When that happens to you it could be the straw that wrecks your retirement, if you are already stretched by your monthly debt payments. There is a surprising amount of baby boomer debt. According to economist Monique Morrissey of the Economic Policy Institute, just under half of retirees are concerned about a problem with their debt levels. Take whatever measures you can to retire this debt; whether it is credit card, consumer, or home mortgage, before you quit working.
Just because you haven’t saved enough doesn’t mean you can salvage your retirement – if you take decisive action. It is time to think out of the box and turn a worried retirement into a comfortable one!
Suggestions and Comments
We would love to hear what creative solutions you are using to survive a financially challenged retirement. Please share them in the Comments section below.
For further reading:
Pre-Retirees Underestimate How Soon They Will Retire by up to 7 Years
You Retire Next Month and You’re Dead Broke – What’s Next?
Survey Results: Many People Expecting a Healthy Retirement Income
Our Members Give Their Ideas for Saving Money Once You Are Retired