Many pre-retirees are not making the trade-offs to fund their post-retirement dreams
- A recent government survey found that nearly 29 percent of households have neither retirement savings nor a pension plan.
- Of those that did, the median savings was just $104,000 for households with members aged 55-64 – equivalent to an inflation-protected annuity of just $310 a month.1
What’s going on here? In a recent Ameriprise survey, 75 percent of respondents described themselves as “savers” and almost all said they had cut back on expenses to save for the future2 but they were much more likely to save on small-ticket items than on big-ticket expenses like rent, a mortgage or college educations. To make their retirement dreams a reality, more Americans will need to make bigger trade-offs. And a financial advisor could help.
More than just basic needs: A value assessment
“A good financial advisor will learn not only about your needs and your goals for retirement, but also about your values.”
“As professionals, financial advisors can look at the projections and help you determine whether or not you’re on track financially to achieve your goals,” says Green. “But they can also help you explore your values so that if you have to make trade-offs, you can see them as expressions of your values, rather than as painful budgeting decisions.”
Assess your priorities – and create a plan
A strong sense of values was instrumental in Kate and Iain Gilbert’s ability to live out their retirement dreams – and to retire in their late 40s. In 2014, the Gilberts sold their home, sold or gave away most of their possessions, and moved into an Airstream RV. Since then, the couple has lived on the road, documenting their U.S. and international travels on a blog and even writing a book about the transition.
What others might call trade-offs, the Gilberts would call a decision about values
Before embarking on their retirement adventure, the Gilberts were successful professionals, who both grew up in working-class households, so they knew how to do more with less. As their colleagues bought bigger houses and luxury cars, they stayed modest; at the time of their retirement, they lived in a San Diego condominium and shared a single vehicle. When the couple reached their mid-40s, they wearied of what they described as the stress and insecurity of corporate life.
Based on their financial situation at the time, they understood that they were on track to retire comfortably in their late 50s or early 60s. But that felt very far away. They came up with a new idea. If they sold their home and no longer had to worry about a mortgage, property taxes, utilities, a cable bill and more, could they retire now?
The answer: Absolutely. “When people learn we retired before 50, they think we won the lottery, or that we’re millionaires,” Kate says. “It’s not true. We worked hard and we saved up a lot of our earnings over a long period of time. But we also dramatically reduced our expenses.”
Retiring early meant valuing some things – travel and togetherness – over others – a pricey home and permanency. “If you can decide what you really want from retirement, there could be a way to make it happen,” Keckler says.