Warning: Retirement Ahead. Now What? A few months back Mr. SH turned 60 and we have been dwelling on the topic of retirement. Actually, Bestie and I have been agonizing over this topic forever. Questions like: Are we ready? How much will we need? What if we live to be 100 years old?
A few years ago Bestie shared with me a getting-ready-for-retirement story that I will never forget. Her sister had sought the advice of a retirement counselor who informed the couple that they would need $3 million dollars to retire!
Uh, shut-the-front-door! I don’t know about you, but we’ve never gotten around to stuffing our mattresses with that kind of money. I’m thinking Mr. SH and I will need another plan. Fortunately, we aren’t completely bereft of options.
In reality, we have unburied our heads from the sand and started moving in a direction that will hopefully see us through our golden years and possibly allow us to have an adventure or two.
Here are some of the measures we are taking as we stare down the road to retirement.
Many of you have read about our downsizing story. We sold a larger home that was starting to need expensive repairs and built a new home. What I haven’t really talked much about is the financial side of this. Austin is booming right now and our old house was in a premium location. We purchased it for a good price and it appreciated significantly. Because of this we knew we could sell it for a decent profit. However, purchasing another home in the same area wouldn’t have done us any good financially. Instead, we bought a smaller home a little further out where the Austin housing boom had not reached ~ so we sold high and bought low.
By doing this, were able to put down a large sum of money as a down payment. This will allow us to pay off the house before Mr. SH retires. Because we bought a new home (with warranties) this reduced our maintenance costs. Our old home was getting close to 20 years old and would’ve need expensive repairs in the coming 10 years. Although there is no guarantee that we won’t have home maintenance expenses, we’ve reduced the likelihood significantly and will be able to pocket those savings.
Purchasing a new home in another county dropped our property taxes significantly. Home values within Austin are soaring at a ridiculous rate, and people are seeing property taxes increase. Imagine your $250K house is now worth $500K. That’s putting property tax costs into the $700-$1,000 per month rate. By moving when we did, we now are saving about $2,000 per year over our previous property taxes. That’s money we can definitely use to save for retirement.
We made energy efficiency a priority in our new home. Our new home has spray foam insulation, low-E windows, and a super efficient HVAC system. Our utility bills are significantly reduced each month by $200-$300. Austin has ridiculous utility rates with add-on taxes. For instance, our old house had a $22.00 monthly rider on the water bill. That’s $22.00 BEFORE a drop of water has been used. Every month our water/sewer/garbage bill hovered in the $150-$200 per month range. Being in a different town and county has reduced this to the $100 range, most months well below this.
By downsizing early, we were able to take advantage of the market and get a great price on our new home which ultimately lowered our monthly bills. This allows us to save more for retirement, but also enter retirement in a home that won’t be cost us a fortune to live in.
2. Nothing Fancy Around Here Anymore
This one ties into our whole downsizing philosophy. The needs-it-all-to-look-perfect-Leslie would’ve said, “This builder’s grade stuff has to go.” The new retirement-minded-Leslie is all, “Who cares about those builder’s grade fixtures.” And, I mean that, too. It would be so easy to take a stash of cash and replace less-than-perfect light fixtures and faucets. But, that just isn’t going to happen.
There was a time when I thought I needed high quality stuff in my house. As in, a dining table that seated a platoon and enough chairs for said table. Gone are those days. I sold my massive dining room table and replaced it with one from Ikea. After all was said and done, I had money left over from that transaction. The same with our home office. We spent around $500 out of pocket after selling what we didn’t need and replacing it with practical storage pieces from Ikea.
With our new, smaller home came several options. We made decisions based on the next 30 years. For instance, we chose a floor plan that didn’t have a formal dining room or a lot of hallways. This way, we have enough rooms with enough space, but no rooms that sit empty. One of our three bedrooms doubles as a guest room/library. It has a trundle bed and a large open space. It makes a great open area for grandkids to play. In the main guest room we chose a queen bed with drawers underneath (Ikea, of course) and that is where my grandkids have most of their toys.
Another area we have really worked at reducing our expenses is in the yard. While there have been up-front costs, we are now reaping some of the rewards. We chose a property that is much smaller and we are fine with that. We’ve purposely reduced our overall lawn area because it is expensive to keep it watered and mowed. We also chose drought tolerant plants that are hearty and don’t require special treatments. That means savings today and savings down the road.
All-in-all, we have spent very little money out of pocket setting up our new home. With reduced payments, reduced expenses, and lower taxes this has made an enormous difference in our budget. And, we are rapidly stuffing our mattresses trying to save a reasonable sum of money.
3. No more Hoarding
I don’t know how to say this any plainer than: I no longer seek self-glorification through the accumulation of things. Put another way: I’m sooooo over stuff.
We’ve been cleaning out my parent’s home for the past several months. Months! Why, because they never threw away anything. My mom had saved slips of paper with useless information from 60 years ago. And, the sewing room was full of unused, never touched sewing notions, patterns, fabrics, and you-name-it. The same story in the kitchen. All I could see was money spent on useless things that are now going to be sold in a yard sale, donated to charity, or thrown into the garbage. It is a sad waste of resources that could’ve been used for their elder care.
All of this has me looking at the way I buy stuff. Or rather, don’t buy stuff. I look at things and think, “Is this purchase something that my kids will just toss in the garbage when I’m gone?” My plan for retirement is to not be buying the latest and greatest thing or hoarding stuff for projects that will never get started. Instead, buy what I need for a project and then complete the project.
And that goes for books, too. Yep, I’ve been a bit of a book hoarder, but I’ve become very selective about the books I purchase and keep. The rest, I borrow from the library or purchase for my Kindle. Our library even has eReader books, too. And, I’ve de-stashed many of my books, too.
Don’t get me wrong, we still have a way to go in this area. But, overall, our philosophy towards conspicuous consumption has changed dramatically and we no longer look for things to buy. Like I said: I’m sooooo over stuff.
Buying, maintaining, and driving vehicles is expensive. And, there is no way to avoid this. Currently, we own a 2006 Honda Accord and a 2007 Nissan Frontier. The mileage on each hovers around 100K miles. We know we will need to eventually replace these vehicles.
Most financial planners will say that it is best to drive a car until the wheels fall off and I wouldn’t disagree. We are hoping to purchase another vehicle in the not-so-distant future. Here’s the quandary ~ what do we buy?
Our current vehicles suit our current lifestyle but we don’t know what our life will look like in retirement. And this keeps us from buying something that suits us now only to need to replace it in a mere five or six years. Currently, one of our daughters lives in Newfoundland, but that won’t be the case five years down the road when Mr. SH retires. They may live driving distance from Texas, and we might want a vehicle that is good for long trips.
Since this is a significant purchase we are putting it off for right now and crossing our fingers that neither of our vehicles will need costly repairs. We hope that getting closer to retirement will give us more clarity on this topic. In the meantime, we hope to get by with what we have for as long as possible and just add that money to our retirement fund.
5. Earning Money and Saving Money
By the time my husband retires he will be eligible for a pension from the state of Texas. He also receives a small pension as a retired fire fighter. Combined with Social Security and savings we should be able to manage on a day-to-day basis. At least, that’s the plan.
We aren’t naive where money is concerned. We know that there will need to be a way to supplement our income. We’ve reduced expenses, downsized, and put off costly purchases. However, supplementing our income is still a pretty fuzzy picture.
One thought is for me to continue blogging. I know this sounds weird and off-beat, but blogging about retirement (or any subject, for that matter) can actually bring in extra money. And, I’ll be able to do this around whatever road life takes us down.
Being able to blog about different experiences will allow us to write off the costs surrounding the experiences. In doing this, we can be certain that our income taxes will be lower. Without a mortgage or other ordinary write-offs we will need a way to lower our tax burden.
6. Be Flexible
I’m going to share a little story about Bestie, here. Several years ago she and Mr. Bestie built their dream home with retirement in mind. A place that their children and grandchildren would want to visit. Well, life never really turns out how we plan it. All three of her children live far apart in different states. So, Bestie and Mr. Bestie got a new plan. They sold that dream home and bought an RV. They got rid of a TON of stuff and put the remainder in storage. Now, they go where the kids are (with a few stops in between). They also have plans for a small place near one of their kids when they get off the road. Being flexible helped them create a new dream.
Being flexible will also help your kids down the road. I’ve watched my parents not have a plan and now my sisters and I are having to make hard decisions on their behalf. They were not flexible when they should’ve been and because of this they are having a hard time adjusting to a new place. And, an even harder time letting go of their things.
We cannot possibly know what the next few years will bring, but we can think smart and start planning now. Taking a few simple steps years ahead of time will hopefully give us a head start on retirement.