Retire When You Can Afford To

by: Roger Nusbaum

A round up of a few things from the blog this week...

A reader left a useful comment on the Seeking Alpha version of my post Working With Your Retirement Number. It was a lengthy comment that included four of his rules including this; 3. Do not focus on a retirement age - set a goal of seeing your investment cash flow cover your living expenses, and then choose to retire if you wish after reaching that point.

Put another way, you can't retire until you're financially ready but I like the way he phrased it. For years I've been talking about something having to give if not enough money has been saved. The reader also opens the possibility of not retiring at all or retiring much later than the 60-65 that many people target.

Another reader left a comment expressing frustration with articles that generally address a "minimal retirement." He went on to share some details of the extent which he started saving early and often and how it has worked out for him so far without his having to live whatever he perceives as a "minimal retirement."

Obviously these types of terms are very subjective and although I am not sure, I think I frame this differently than what I think the reader is saying. I think that what most people hope for is to not to have less of a lifestyle than when they were working. A $40,000 lifestyle before retirement will not reasonably become an $80,000 lifestyle after retirement but hopefully will not need to be a $20,000 lifestyle.

Various ideas about saving more and spending less are generally aimed at having a better shot at not having less of a lifestyle after retiring. In thinking about who is richer, the man who makes $100,000 but lives like he makes $200,000 or the man who makes $20,000 but lives like he makes $10,000 I believe the easiest path is to live below your means. Not everyone can do this but some can.

Whether this equates to a "minimal" lifestyle will be based on the the individual's personality, interests and perspective. Someone making $100,000 per year but "needing" a new Mercedes every two years is going to probably end up feeling disappointment at some point.

On a related note, yet another reader left the following on the original post on the blog;

...Also a GREAT deal of thriftyness. Example, No attending NFL,MLB, or NBA for me considering the expense vs free entertainment that is out there.

My reply;

That is an interesting train of thought. I tend to spend money on these sorts of things a few times a year. San Diego State (my school) is due to play on the smurf turf in November and I plan on going.

Assuming one does not go into debt for these extravagances then the decision to spend on them or not can boil down to how your doing financially.

What I mean is that if you are not adding to your debt burden then you can simply stop the activity if/when financial circumstances dictate.

Ditto with vacations. We spent a lot of money (for us) on our NZ trip, paying as we went. If our income changes we can simply not take a trip. Different story if we were going to be paying for the NZ trip for the next two years.

The thing to add is that paying bills and setting some reasonable amount aside takes priority over things like games, concerts and vacations. But if your bills are paid, you have set something aside and, while we are at it, have your debt under control (or better yet have eliminated your debt) then, to the second reader's point, have some fun. If you are lucky to have something left over, don't spend more than what is leftover.

Fun and living within your means are not mutually exclusive.

A quick laptop update; the old Lenovo is still working after appearing to die in Rarotonga. I said I was going to replace it but have not done so. As one reader noted, just threatening to get a new one might have done the trick.