Episode 150 How much is enough?
Hi podcast listeners. This is Retirement Talk. I'm Del Lowery.
One question that people getting close to retirement always ask is, "How much money do I need? How much is enough?" Of course that’s a pretty good question. That is always first and foremost in their minds. There seems to be no hard and fast rule. What is a person to do?
I remember facing this question years ago when we decided to retire. Let me lead you through our thinking process as we made that decision. Not that your situation would be the same but there might be some similarities.
We had a chance to take an early retirement offer by the state of Alaska. We liked our jobs but the oil boom of the seventies and eighties was ending. People were leaving Alaska and the schools were loosing enrollment. They needed to loose some teachers. We were being enticed into stopping work when we were fairly young. I was 44 and Brenda was 41. Now that is pretty early to even consider retiring let along doing it. What to do?
“Life is short”, someone said somewhere at sometime. I taught philosophy and took those kind of sayings to heart. Though we liked our jobs we took this finality of life seriously. We knew that there were other ways to live than continuing in this one direction. We had ideas as to what we might do if we changed direction. The big question came down to money. Could we afford to retire?
If we wanted to continue to earn money then we wanted to stay in our jobs. But if we could live on the money provided in our early retirement package then we would be free to do what ever we wanted, live where we wanted, move, or not move, sleep late or rise early. We could go back to college, or hike in the mountains. It wouldn’t matter. We could follow the path laid out by Mother Teresa or we could try to emulate Warren Buffett. Whatever.
How could we know if we had enough money? It was comforting to know that we were living good at that time and would see a pay raise every year as long as we continued to work. We could continue with this good life. Of course death would make sure it would end some day. We could choose to end it now and do something else with our life. But the question loomed: Would we have enough money to live with out working for wages?
We took a clean piece of paper and wrote down how much money we thought we would need. The list started with housing costs: utilities, upkeep and that sort of thing. We had paid off the mortgage on our house by getting just a ten year loan rather than the usual thirty. So housing was no longer a major factor. We then figured the price of transportation: car upkeep, etc. Then came food and clothing, etc. That really wasn’t much. Our retirement plan from the State of Alaska included super good health care insurance; good until we die so that was not a factor. We were very lucky on this one.
We totaled up estimated costs and were amazed at how low they were. It became clear that if we did not buy a boat, airplane or huge RV we could seemingly forever say goodbye to the world of work.
That was 27 years ago. How have we done? Prices have gone up. What has happened to our budget in light of all the changes? We’re doing fine. We have never had to consider taking another job for money. What was the key? Probably lots of thing but primarily good luck. We did not get a terminal illness. We did not have our house burn down. We did not have an earthquake shake us to death and we were not invaded by barbarians. These things were beyond our control and we did luck out. There is no substitute.
But what steps did we take that made our retirement affordable? I think its the idea of spending less money than we took in. Of course we have all heard this before But we actually practiced it. “Spend less than you make." It worked for us. We also stayed married. That has to be worth something. Money being only part of it.
I know people facing retirement are always wondering about the future costs and the limits on their income. I guess that will always be a guess, shot in the dark, or estimate at it’s best. But sometimes I think treating this doubt as a limiting factor is just an excuse to avoid change.
I’m reminded of a story of Alexander the Great when he was on the move and his army rolled into India. It is said that he was sitting there on his big white horse with an entire army strung out behind him and he came on six men standing in two columns side by side. They marched up and down in place. They were silent. The conquering hero asked his interpreter what the men were doing and the response was, “They are asking how much land do you need since we all get only six feet – enough to bury us”.
I think of this story when I consider how much money one person needs. It doesn’t seem to me that one needs much. Of course health care is a big unknown every day of our life. We were lucky with our coverage. Fortunately most Americans are covered with Medicare during most of their retirement. I know we live in a consumer society where we are encouraged at every turn to buy something new but that doesn’t mean we have to agree. There are other choices.
A few years ago we were temped to rent our condo in downtown Vancouver. The Winter Olympics were coming and we could get “rich” so to speak. We decided to pass on this one. We just stayed put and enjoy the festivities. It’s not often the Olympics comes to town. We could make some money but...
How about you? Have you considered this question? Have you answered it? How did you go about making this decision? Has the answer proven true - or not. Drop me a line and I will pass along your story in another podcast.
This is Retirement Talk with something to think about.