What You Must Do If You Ever Hope to Retire

The recent ups and downs of the stock market should be considered a warning to those of us in our 40s and 50s who intend to retire before long. If your retirement money is invested in the stock market, even in index funds, you could suddenly lose some or all of it, and your retirement plans will be postponed or might even be destroyed.

After reading this cautionary tale, I got to thinking about how even the best-prepared folks can be wiped out if they haven’t taken enough precautions. The fellow in the article has been a hard worker all of his life. He had a great job with a solid (and famous) company, and thought he had prepared well enough for retirement. But now, at age 70, he’s living in a leaky RV and working exhausting, low-paying jobs, like spending ten hours a day as a temporary worker in an Amazon warehouse.

Clearly, this man is smart, not lazy, and he’s had some hard luck (including the illness and death of his first wife). But after finding a new love (someone who also lost all her investments in the 2008 financial crisis) and marrying her, their lives together became even harder.

What else could they have done to prevent having to spend their so-called golden years keeping their ancient RV running while they travel around the country looking for work?

The clues lie in the sixth paragraph:

By the time Barb and Chuck got married in 2009, they were upside down on their mortgage and grappling with credit card debt.

This led to bankruptcy and a forced downsizing of almost all their possessions. We undertook a preventive downsizing, and that was painful enough. So I can imagine how much tougher a forced downsizing must have been for this couple. After I read this article, I told my husband, “There but for the grace of God go us.”

The first clue, being upside down on their mortgage, is common enough nowadays. But it used to be common wisdom that you always pay off your mortgage before you retire. That way you have a roof over your head, no matter what else happens. Middle-aged people who are upside down on their mortgage either financed more house than they could afford, or used their house to fund a lifestyle they couldn’t afford via a home equity line. The takeaway here is, pay off that house before you retire!

The second clue, grappling with credit card debt, is a problem for people of all ages. We’ve had a lousy economy for years, so many people put basic expenses on their credit cards and pay only the minimum monthly payments. Add in those who used credit cards to live beyond their means in order to impress themselves and others, and this couple has plenty of company. But if you plan to retire, having credit card debt is a very bad idea. Those who have never learned to “pay cash or live without the item you want to buy” need to do so ASAP, and long before they actually retire.

Ultimately, retiring with any debt at all is a risky proposition. In retirement, you can willingly live with far less and still be comfortable and secure. The couple in our cautionary tale shows you what could happen otherwise.

 

 

 

Why My Twitter Profile Picture Looks Like Carlotta Vance

I chose Marie Dressler for my Twitter profile photo in homage to her character, Carlotta Vance, from the classic 1933 film, “Dinner at Eight.”

Carlotta is a woman who once had fame and fortune, who knew what it was like to live in luxury. But in the movie, she is no longer young and beautiful, no longer pursued by men who want to woo her with furs and diamonds. In fact, as her career wanes, she finally reaches the point where, as she tells her dear friend Oliver Jordan, “I haven’t got a sou!” Yet she faces life with courage, concern for others, and as you see in the clip above, a sense of humor.

The character of Carlotta is a role model for me. Over the last decade or so, the lousy economy has dealt my family some hard blows. We lost a business and had to sell our family home. Our income is nowhere near what it once was.

It’s often tempting to feel sorry for myself, and sometimes I do. But most of the time, I want to be like Carlotta. I want to face the future with a sense of hope and charity.

In that spirit, I wrote Downsizing Your Life for Freedom, Flexibility & Financial Peace. It’s had a good response, and I’m grateful. Now I’m writing another book related to it that I hope will also help and encourage others.

Times are challenging for many people these days. I want to help others by sharing what my family has learned, and by telling everyone that being proactive about change, especially change you didn’t ask for, is the best way to get through hard times and keep enjoying your life.