Your later years can be golden without being gold-plated. Most retirees are frugal by necessity-but no less happy
Having spent much of his career helping others with their finances, Don Peterson knew the importance of saving as much as possible before retiring. But when the 82-year-old former stockbroker left the workforce in 1988, he realized that retirement isn't just about money.
In his case, Peterson retired a bit sooner than he had plannedand with less money in the bank. But that was partly due to bad timing. Shortly after a few of his investments went bad in the 1987 market crash, his wife, Bobbie, decided it was time to retire from her career as a hospital laboratory administrator. And soon after that, one of the couple's daughters asked them to move from Eau Claire, Wis., to Nashville to be closer to her and the grandkids.
So even though the Petersons had less than $100,000 in their accounts and just one pension between themhers, which paid out only around $500 a monththey quit their 9-to-5 life and shuffled off to Music City.
Their challenge was one that millions of older Americans are faced with every day: finding a way to lead a comfortableand, yes, happyretirement with only a modest nest egg.
For the vast majority of today's older workers, this is the reality of retiring in America. While financial planners and retirement experts debate how many millions of dollars families should saveand how to invest that money to make it lastmost households are retiring on meager sums. Nearly two thirds of workers 55 and older have less than $100,000 saved for their golden years, according to a recent study by the Employee Benefit Research Institute. And 56 percent of those workers who are already retired have less than $50,000 to last them for the rest of their life.
Happy campers. Yet somehow, "people often find a way to get by," says Gayle Oboy, a financial planner in Marion, Ohio, who works with many middle- and working-class clients. "They adjust. They find ways to cut back but still be content." In fact, studies show that more than 60 percent of seniors find retirement "very satisfying." Most also say retirement is more satisfying than their working careers were.
Sometimes, it does take a bit of creativity. The Petersons, for instance, leveraged two assets they hadtime and a love of animalsand started a pet-sitting business after "retiring" to Nashville. It wasn't a glamorous job"my wife jokingly says I have a Ph.D. in cat litter," Don Peterson says. But the modest income they derived from dog- and cat-sitting "made all the difference in the world," he says. "It helped pay for the groceries and helped cover property taxes." It also gave the couple the freedom to retire on their own terms.
Those who don't want to or can't work during retirement are starting to take advantage of another asset: their homes. Thanks to the run-up in home values during this decade, some retirees are starting to downsize to cheaper digs and using the remainder of their home equity to finance retirement, says Jean Setzfand, director of financial security for AARP. Others are choosing to relocate to less expensive parts of the country, which is what the Petersons did. "It's an insurance policy of sorts," Setzfand says.