We often develop habits and adopt thought patterns that can work against our plans for retirement. Some of these counter-productive behaviors may impair the growth of our retirement nest egg or obscure our retirement lifestyle goals. Here are a few mind tricks I have used in recent years to overcome bad habits and reorient myself toward positive behaviors that will help me progress toward retirement:
1. Before making a discretionary purchase, convert the dollar cost into personal time. The closer we get to retirement, the more we become aware that our time is limited. If you are considering purchasing another $100 gadget, think first of how much longer you will have to work to fund that purchase. If you earn $25 per hour, that gadget will consume four hours of your time. With that mindset, maybe that gadget isn’t needed after all. Instead, the $100 gets added to your retirement nest egg.
2. When considering the cost of goods and services today, think of what that money will buy you in retirement. Let’s assume that you are thinking of purchasing another vehicle. One option is to buy new for $30,000. A less expensive alternative is buying used for $15,000. When weighing the options, add this concept to the thought process: Using the 4 percent retirement income withdrawal rule, the new versus used cost difference of $15,000 could change your retirement income by $600 per year. That may not seem like much of a difference now, but imagine how having that extra money will feel when you are on a fixed income.
3. When putting money aside for retirement, target a specific spending category. We know we need a large retirement nest egg. However, saving more because we need more is a vague goal that is not highly motivating. Instead, think about something fun that you plan to do when you retire, such as travel. Imagine wanting to take a cruise each year when you are retired. Estimate that each cruise will cost you $1,000 in today’s dollars. To fund that spending category (again at a 4 percent withdrawal rate), you will need a retirement cruise fund of $25,000. That’s a specific and motivating goal that you should think about when you forgo an expense today.
4. When traveling today, think about retiring there tomorrow. As we age, we more frequently ponder where we want to retire and tend to imagine ourselves living in various places. To take that a step farther, travels to new destinations should be treated as retirement tryouts. Tell yourself that you are not just visiting that location but attempting to live there. For example, go shopping for groceries, visit the local library, and talk to the locals. What you learn from these mini-retirements can help shorten your list of potential retirement destinations.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.