Boomertowne

6 Retirement Planning Tips For Middle-Aged Procrastinators

By ChristianPF on | From christianpf.com

My 56 year old friend Colin (fictitious name), recently told me that he plans to retire at age 65 and then kick back and do what he wants.

His retirement will include traveling when and where he (and his wife) choose, driving his vehicle of choice and pretty much living the good life. Without probing, I learned:

He has very few (if any) retirement investments and is not currently saving any appreciable amount.
He will still be making house payments after age 65.
He has recently purchased a vehicle that he will be paying on for several years.
He would like to purchase a truck (requiring a loan) within the next year.
He currently works two to three jobs, all requiring physical activity.
He is in decent health, but has had increasing knee and leg pain in recent years.
He is the sole provider for his family.

I could feel my stress level increasing as our conversation continued, but Colin seemed to have a disconnect between his retirement and his plans for that retirement. Should I have asked him exactly how he planned to pay for his retirement? Probably – we have a high trust level – but I didn’t.

But now I wonder: how many Americans take a similarly “dream world” attitude toward their retirement?

The 2010 Retirement Confidence Survey reports that only 69% of workers have saved anything for retirement, while 27% have less than $1,000 in total savings. Furthermore, American workers are clueless about what they need for a comfortable retirement; less than half of the married couples have ever even tried to calculate how much they would need to save.

Are you feeling my stress? Are you one of these statistics? If so, don’t despair. No matter what your age, the following steps can make your retirement a rational plan instead of a fuzzy wish.

1. Make a plan.

Be realistic. If you cannot achieve a retirement income equal or more than your current working income, plan for your retirement standard of living to be lower than your current standard of living. And DO NOT count on Social Security to fund your retirement. It is a broken system doomed for failure.

2. Get out of debt.

I know. You hear this all of the time. But this one step is the simplest way to increase your retirement cash flow. Think of it like this: that $500 car payment, $800 credit card payment and $400 furniture payment translate to $1,700 a month toward your retirement income – IF you pay them off. This equates to drawing 3% annually from a $680,000 nest egg. Which is easier: getting out of debt or saving $680,000?

3. Pay off your mortgage.

House debt and retirement are not good chemistry. As in the previous illustration, that house payment will be going to you instead of the bank – when the house is paid for.

Hint: if you are considering purchasing a house, plan the term of the loan to be less than the number of years before you retire.

4. Save.

No matter how old you are, it is never too late to start saving. Whatever nest egg you accumulate will be more than if you don’t start. Besides, you will be learning a habit that you will need once retired: live on less than you make.

5. Plan to work part time.

What do you love to do? Start doing it part time now and save every penny you earn. Then, when you retire from your full-time job, you can supplement your retirement income by continuing to do what you love.

6. Keep working as long as you can.

Retirement does not magically happen at some arbitrary age; it happens when you can afford it. The longer you are able to work (and do the things I listed above), the better you will be able to afford it.

Don’t be like my friend Colin and assume all will be well. It won’t unless you make it happen.

Colin: are you reading? I hope so.

Readers: what other suggestions do you have for those who have not planned for retirement? Any ideas on how to make the Colins in this world wake up? Do you think I should have challenged Colin’s concepts of retirement?

Photo By Kate E Did

Joe Plemon, a retired engineer, financial counselor and blogger, lives in Southern Illinois with Janice, his wife of 39 years. Joe likes online Scrabble, St Louis Cardinal baseball, blues music, power naps, high school football, short term mission trips and Sunday family dinners. You can read more from Joe at Personal Finance by the Book.

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