When You Haven’t Planned Enough For Retirement
Many times people underestimate how fast retirement comes into their lives. When we are in our 20s, we think we have plenty of time. When we are in our 30s, our priorities are towards our new home and new stuff for our new home. When we are in our 40s, the priorities may turn toward the children, sending them to good schools, vacations, and making the most of the time we have with them. When in our 50s, college education costs come into the picture as well as marriage of the children. Then we get to the 60s—it's time to retire! Now what?
It is estimated that most Americans do not have enough saved for retirement. Based on my experience, most Indians haven't either. So what do you do if you haven't planned enough for your retirement? Based on life expectancies and advances in health care, you could live to age 90 or even 100. If you were to retire at age 65, that means you may have to provide for yourself for many more years to come.
Let's get back to the basics.
Our lives are determined by the amount of money we make and also the amount of money we spend. I have seen people who make in excess of $1M per year and still struggle with savings, while individuals making $50k a year may be able to save as much as 15-20%. Here are some recommendations on making the most of what you have.
?Take inventory of all of your assets including your home, savings, business, retirement, etc. Find out what your real net worth is. You might be surprised that you have more than you thought.
?Take inventory of all your expenses. Write down all of your monthly expenses. Write down every cent you spend on a day to day basis. You might find that you have many daily expenses that can easily be reduced or stopped. You have to find places where you can stop hemorrhaging some of your expenses.
?Ask yourself questions. How can you reduce your monthly expenses? It might mean that you need to significantly downsize your lifestyle. Trade in the new car for a nice used one. Move into to a smaller home. Take on a roommate or a renter in your home, if possible.
?Meet with a CPA or a financial planner to find out if you are taking the benefit of all possible tax deductions and have invested your money efficiently. Many times, retirees pay unnecessary taxes on interest and social security earnings when their assets can be restructured to reduce the tax outlay.
?Plan on working in your retirement. There is nothing wrong with that. Many people choose to work their entire lives. It gives them significance and pleasure with a sense of purpose. Even if you were to work part time, it can make a significant difference in your lifestyle. Your job may help pay for your health insurance and give you access to contribute to an employer retirement plan such as a 401k.
?Start saving now! There is no time like the present. See if you can start saving a consistent amount on a monthly basis. Saving doesn't necessary mean investing. It could mean paying down your debts such as mortgages, car loans, or just saving into a savings account. The bottom line is that you want to reduce or eliminate your debts and increase your savings.
What if, after all this, it isn't enough? One benefit people from India have is that they have an option to retire back home. There are more and more people who are moving back home for retirement and are finding it an excellent choice. For example, for a person in the U.S., $1000 a month in income generally doesn't go too far. However, convert the same $1000 to rupees, and you have around 43,000 rupees per month.
I know of a person who recently retired to India. He found a nice 3 bedroom flat in Gujarat for 8000 rupees per month—fully furnished with A/C! He has a tiffin service 2 times a day. He enjoys walking to the park and meeting with friends daily and also has a person coming in to clean the home, make the beds, and do the laundry. All for a very small amount when converted from dollars to rupees. Try to do that on social security income in the U.S.! The bottom line is that he is very happy. India can also afford many of the luxuries we have become accustomed to, and then some.
There are always options. Sometimes we need to think outside the box to come up with creative solutions. If you are young and are not saving enough, I would suggest getting started now. The decisions you make today will have a significant impact on the choices you will have tomorrow. All the best!
By Rajesh Jyotishi
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