“Even though this couple had never lived extravagantly, they cut their expenses again and again—finally to the bone—but still could not make ends meet.”
An 80-year-old man shares his experience and hard lessons about retirement income in this article from the Canton Citizen “Smart About Money: Retirement Lessons.” The story begins when he retired from a mid-sized company with a “guaranteed pension.” The pension may have been guaranteed, but what was not guaranteed was the amount of his monthly payments. They were cut, several times.
He and his wife were receiving about a third of what they had counted on receiving, which created a financial hardship they never anticipated. They did what they could with their budget, but had to tap their savings, which were nearly gone.
Friends suggested a reverse mortgage, but they were reluctant to do so. Their home was the only asset, and they didn’t want to find themselves with nothing.
He also wished he had never trusted his pension “guarantee.” He wished that he had multiple income buckets for retirement. A pension and Social Security are two buckets, but a third and a fourth would have given them more income, which as it turned out, they desperately needed.
Finally, he said that he wished he and his wife had devoted more time to planning for their retirement years to last far longer than they had anticipated. They are both likely to live into their 90s, or even to 100. They had no idea they would need income for a three- or four-decade retirement.
There are no guarantees in retirement planning but having multiple sources of income makes it far more likely that your retirement income will be enough to live on, and hopefully enough to enjoy the things you want to do during retirement.
Social Security is not a guarantee, although it has been dependable in the past. It is possible that this government agency will face challenges in the future. Fewer and fewer workers have pensions of any kind. Instead, we rely upon our 401(k) and IRAs to keep growing. A plunging stock market could take a bite out of those funds. Personal savings that grow over time and home ownership are worthwhile goals, but real estate prices do fluctuate.
To use a different metaphor, consider a chair with three or four legs. The chair with four legs will always be more stable. The more sources of retirement income you have, the more likely you’ll be financially secure during your retirement, regardless of how long it is.
Reference: Canton Citizen (Dec. 16, 2018) “Smart About Money: Retirement Lessons”