In Part 1, we discussed the ingredients needed to “cure the disease” – the malady of not having enough financial resources to maintain your lifestyle (including living cost increases) – throughout retirement. With time, savings and discipline it is often possible to get back on track. Sometimes, however, there isn’t enough time and the gap is too large to truly pursue a cure. In these instances, we are left with “treating the symptoms”.
Recent research suggests two startling facts that provide instant context for this discussion: 97% of baby boomers aren’t saving enough for retirement; and 55% are spending more than they make on an annual basis. These are symptoms of the disease we want to treat. It is a big challenge, but there are steps you can take to reclaim the path towards financial independence. It can be done.
Take it Step by Step
The first step is to develop a very clear focus on a future goal, a specific “something”. Once you have clarity, you can then proceed to build (or rebuild) a habit of saving from today’s income towards that goal. In the early stages, it is not important that the savings be “enough” but simply that the saving/investing habit is created. Many years ago, we had a client with a seven figure per year income and we started him out saving a few hundred dollars each month. Sure, that was not “enough” but it was a way to begin treating the disease.
Assuming the gap between resources available versus resources needed is large, the next step is to prioritize and make choices. Can you retire later? Can expenses be “downsized”? Simple choices such as delaying Social Security (benefits increase about 8% for each year between age 62 and 70) can have a huge impact over the long term.