What If You Can't Afford To Retire?

By Chuck Yanikoski

If you listen to the ads from financial companies, or read the financial press, or watch financial gurus and hucksters on television, you may think that being financially ready for retirement means investing your money shrewdly. And therefore, if you cannot afford to retire, it means you did not invest well - and perhaps you just need to do a better job of it.

There is some truth to this notion, but not much. As many people learned in the last two years, investing "shrewdly" too often means putting your money at risk, and then losing too much of it when markets turn sour. Truly wise investment, however, means not gambling with money you can't afford to lose - which for most of us means: not gambling at all.

Not gambling doesn't mean always taking the most conservative path, but it does mean diversifying, not putting much of our nest-egg into the stock market (where, for most people, more than twenty or twenty-five percent is probably too much, if they are retired or anywhere near retirement age), and not panicking and withdrawing our funds from the market when the indexes drop.

Those of us who did not already know these things learned them during the recession that we are still struggling to get out of. But the financial industry still lags behind, perhaps because they have a vested interest in promoting investment. They still try to give you the impression that if you don't quite have enough, you can make up the difference just by investing a little smarter (i.e., more aggressively and, coincidentally, using the advertiser's or advisor's funds or services).

This is an appealing message, because it tells us that we don't have to give up anything. We don't have to work harder or longer, and we don't have to be more disciplined about our expenses. We just have to get our money to work harder. No skin off of our noses.

Until, of course, the markets rebel and then it's not just skin off our noses, but flesh off our bones. If you are getting near to retirement age, or are already there, the best thing you can do for yourself is simply to not listen to these blandishments. No matter how smart you are, and no matter how smart your financial advisor is, investing your way out of a tight spot is a gamble, pure and simple. And once you're retired, if you find you have lost that gamble, you may be in worse than a tight spot - you may be in a predicament that you can no longer escape. Once you have been retired for a while, it's going to be very tough to go back and earn money like you can before you retire, and for one reason or another you may not be able to work at all. You can't afford to truly gamble in retirement.

So if you are doubtful that you can afford to retire, resist the temptation to try to invest your way back into a good position. Instead, you really have only two reliable choices, or a combination of them: (1) work more, and/or (2) reduce your expenses.

Working more can mean simply postponing retirement for a year or two or more, or it may mean using the Workforce50 site to find yourself a better-paying job - or maybe a second, part-time job. If you are married, perhaps your spouse can be considering similar options. If you are in your late fifties or early sixties and in average (not great, merely average) health for your age, you are expected to live well into your eighties. You could afford to work a few more years and probably still have a lot of time left to enjoy your retirement.

Reducing your expenses might be an even better option, though. It's true, of course, that we all tend to cringe just at the thought of it. We always intended our lives to get better and better - often translating to: being able to afford to spend more and more money. But this equation between quality of life and spending money is mostly phony, and if you are feeling financially pinched, maybe it's time to reconsider.

If you are like most Americans your age, you live in a home that's about twice as big as you really need, you eat richer food than is good for you, and you don't even realize where you spend most of your money. You could probably live on half of what you spend now and, after a brief period of adjustment (which might be difficult for you, or might feel like a big relief), you will be just as happy as you were before.

You may even be happier, because you will have less house and yard to take care of, so you can spend more time actually enjoying yourself, you will feel more vigorous if you start eating more basic foods, and you will be less stressed about making ends meet.

If you are wealthy, you're not reading this anyway. If you're not wealthy, you will be far better off if you stop listening to the siren song that has been sung to us much of our lives: invest well, get rich, retire and live high off the hog. Even if you could do it that way, you would not be happier than if you live well but modestly, and derive your pleasure not from spending money, but from what has true value: friendship, love, purposeful activity, healthy living, tending to the inner you, and acceptance of life as it is.

You know what? You probably can afford to retire!