This is the last in a four part series on inflation. It is about retiring on less.
You have probably heard that you must have 70% of your before retirement income to retire and maintain your lifestyle. That is BS put out by the insurance salesman and the securities salesman who are trying to sell you something. The best way to get this information is to ask someone who has retired and done it well. I have.
I had heard all that crap and was a bit worried since I didn't expect to have more than 40% of my before retirement income. And it has turned out that I was right about the 40%. However I am living better now than I was before I retired. But it is all in your interpretation of what "income" is.
First, if you are young, work at getting your house paid for and mortgage free. Many young people just keep upgrading their house and rolling the excess over into the next house. This results in your getting to your retirement with a mortgage still sitting on your shoulder. You will probably find that you WILL need 70% of your before retirement income!! So work on getting rid of the mortgage.
Second, don't go into retirement with a payment on a car due every month. This is the easiest of things to accomplish. In pursuit of this goal, don't ever buy a new car!!! There is no reason to own a new car. I have heard all the excuses for owning a new car, and all of them make no sense. The only reason to own a new car is to "look good". That is a fools mission. If you think driving around in a new car makes you look good, then you ARE, indeed, a fool. You can look good in an older car that you have restored yourself to like new condition. I have always driven Mercedes, Bentleys, Lincolns, etc that I bought for next to nothing and restored as I drove them to work every day. Now talk about looking good........
But there are other reasons that while invalid, many people think are reasonable.
1) "I need to get to work and need a reliable car." That is a myth. A used car can be more reliable than a new one. Usually all the bugs have been worked out and if you maintain the car it will last for 40 years! I have owned over 120 cars in my lifetime and only two were new...and paid for with cash!
2) "I cant maintain my own car so I am at the mercy of the dealer." Bull Sxxt. Anyone can maintain their own car. Both my daughters were taught from an early age how to maintain their cars. If you think that part time, drunk, mechanic down at the garage is smarter than you are, I feel sorry for you. The first time I overhauled a car I was 12 years old and had NO EXPERIENCE OR HELP. No, I am not a genius. Its just that my father told me from the time I could first understand English:
"There is no such word as cant, The word you are looking for is wont. You can put a quart of piss in a pint jar if you want to bad enough." This, from a man that had a third grade education and became the County Surveyor of the biggest county in the united states and when he died the replacement had to have a Masters degree in Civil Engineering.
There is nothing you cannot do if you want to do it! But you cannot do it until you start it. First, open the hood. It gets easier once you have the hood open....#8-)
3) "I dont have any cash and the only one that will make me a loan is a new car dealer." Gosh I wonder why? Its because he is screwing you. If you don't have cash, just ride the bus or a bike until you save $200 a month (thats what your payment will be at the minimum) and have enough to buy a good 10 year old used car. You can move up later as you save all that $200 a month you would have been putting into a loan.
4) Back to the first excuse....if you add up the insurance payment, the gasoline, the tires, batteries, the cost of the car, etc and etc. You will find that you could take a job that paid less and was close enough to walk to so you wouldn't need a car at all. Ok, I know that that might not really be feasible, but you might try adding up the cost of owning even a NEW car with no mechanics costs. And remember, if you are your own mechanic you will have no mechanic costs!!
Third, when you retire you will have a lot of TAX FREE income that you didn't even know you had. You are retired so you have TIME that you can spend as though it were money!
1) every time you mow the lawn you make $100 that is non taxable, non reportable, because before you had to pay someone to do the job because you were working. AND you had to pay taxes on that money before you paid it to him so you actually had to earn $110 in order to pay him $100 !
2) every time you do a repair on your house that a repairman would have charged you $1500 for and you do it for $300 in materials, you just made $1320, TAX FREE, because you did it yourself. If you think you cant do it yourself, refer to my comments on "Can't".
3) every thing that you do yourself can be analyzed that way and so you will soon see you are making more than you ever made working for someone else, and you will like your new boss, yourself. You can take a break whenever you want.
4) Your medical expenses will drop because you are keeping busy and getting exercise.
5) Remember the car thing? Now your car expenses will drop to 1/10th of what they were when you had to drive to and from work every day.
6) Your eating costs will drop precipitously because you wont pay $1.50 for coffee and a donut for your morning coffee break and again for afternoon coffee break and you wont pay $10 for lunch. Instead you will stop the lawn mowing, go in the house make some fresh scones for about 10 cents a piece and a cup of coffee for 10 cents and sit on the porch swing and marvel at how nice your lawn looks.
The list goes on and on. But you see the point. The more you do for yourself the more TAX FREE income you have and the healthier you will be.
Jim Isbell
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