Don't let so-called financial experts scare you. Remember, it's in their interest to persuade you to save more than you really need, then hand over your nest egg for them to handle so every year they can skim off 1 or 2 percent of your assets for a profit.
They’ll probably say you need 100 percent of your pre-retirement income to retire well. That may be an option for 1 percenters who leave work with golden parachutes, but it's not a realistic goal for most of us, nor need it be. You can retire on a lot less than some people want you to believe. If you're serious about retiring on a bare-bones budget, check out these strategies:
1. Assess where you stand. The first thing to do is count up all your assets and debts. Hopefully, by the time you're considering retirement, you have more assets than debts. Your mortgage may be paid off or nearly so, and you should no longer have any student loans. Now is not the time to take on new debt. If your car is getting older and you can afford a new one, go ahead and buy it. But if you have to take out a big loan, keep the old one and fix it up.
2. Downsize your housing. Your kids are grown up. You don't need three or four bedrooms anymore. A lot of people hang on to the old place unnecessarily, just in case Junior wants to move in after college or Missy needs to come home after a divorce. But these are "what ifs," while the expense of carrying a home is a certainty. If your retirement budget is limited, then take the leap and move to a smaller place, preferably in a less expensive neighborhood with lower taxes, less maintenance, and smaller utility bills. Don't put off the move just because the real estate market is bad. You'll sell your old home for less, but also pay less for your new place.
3. Share and share alike. If you're single, consider sharing a home with a friend or relative. Many older houses feature mother-in-law suites, and some newer construction offers two master bedrooms. Two can live cheaper than one, and this arrangement offers you some companionship as well. Take the concept of sharing a little further. I know one older woman who has a car, but she doesn't trust her eyesight to drive much anymore, especially at night. So, she lets her best friend use her car. Her friend pays for the extra insurance (make sure to put the other driver on your policy), helps defray other car costs, and occasionally runs an errand for my friend as a thank you.
4. Search out free entertainment. If you want to cruise the Mediterranean on a first-class ship, you might need 100 percent of your pre-retirement income. But most people don't do that. Your town or city likely offers lots of entertainment options including free summer concerts, fall festivals, and exercise classes for seniors in the winter. Check out your library for free seminars, book clubs, movies, and lectures in addition to the usual books, DVDs, and free computer time. Your church, veterans association, political organization, or social club can also provide many rewarding activities for your leisure time, all at little or no cost.
5. Stop subsidizing your kids' lifestyles. Dr. Jonas Salk, who discovered the polio vaccine, said, "Good parents give their children roots and wings—roots to know where home is and wings to fly off and practice what has been taught them." It may be hard to say no to your children. But you've already given them roots. Now it's time for wings. It doesn't really help anyone to let them settle into their old bedroom after college. They need to find their own apartment, buy their own car, cook their own food—in short, learn to live on their own.
6. Take advantage of senior citizen discounts. Consider joining the AARP for discounts as well as supplemental medical insurance. Take a trip to town hall and find out about real estate tax breaks and other senior citizen discounts. While you're there, check out free or low-cost programs the town might offer senior citizens including free transportation, low-cost meals, and health and medical services. Many municipalities offer programs that are underutilized simply because people don't know about them, and are embarrassed to ask.
7. Go international. In the movie The Best Exotic Marigold Hotel a group of pensioners outsource their retirement to India. There are American retirement enclaves in many Latin American countries such as Mexico, Costa Rica, Panama, and Ecuador. Some people retire to the land of their grandparents, in Italy or Ireland, where they enjoy both financial and psychological support from family members. A recent trend takes people to Asia, including Malaysia and Thailand. These countries are relatively safe, the cost of living is low, and the local people like Westerners and respect the elderly. Retiring overseas may pose a risk and requires a lot of research, but it's an option more budget-minded people are considering.
Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.