Life can certainly throw you some curve balls. Many of these unexpected events can come in financial form. And such setbacks can affect how we plan and prepare for retirement. According to a Kiplinger.com article, "In a new survey by Ameriprise Financial of people ages 50 to 70, virtually all of the respondents said they had experienced at least one retirement derailer, and more than half said that it had seriously affected their retirement savings. The average amount lost or forgone: $117,000. A poll of Kiplinger's readers showed similar results."
Our own family has been hit by several major setbacks along our road to retirement. However, in most instances, we've found ways to turn these lemons into lemonade.
Even though my job loss was self-inflicted when I made the choice to leave the hotel business and try my hand at writing, it was a job loss nonetheless. In the process, I took a reasonable and stable salary and threw it away in deference to an unstable and much lower income as a freelance writer.
This was a significant setback to our retirement planning, but I've been able to look for ways in which to minimize the issues it's created. While things like salary and contributions to things like Social Security and an employer-sponsored retirement plan have suffered, I've saved our family significantly on childcare costs (which would have been around $10,000 a year per child for daycare) by caring for each of our two children while still earning a paycheck (albeit a smaller one) working from home. We also sold our second vehicle (saving us another $4,000 to $5,000 annually), since I no longer had to commute to a job.
Not saving enough
But even with finding the perks that go along with my at-home role, we still weren't making significant progress in our efforts to save for retirement. Therefore, we made other adjustments, starting to do things like shop for clothes at resale shops and garage sales, utilize discount grocery stores to save on food costs, and do more "staycations" rather than costlier vacations.
We have also remained debt free during this time, working hard to avoid debt when and where possible and even downsizing to a smaller home so that we could free ourselves from a mortgage. An infographic on creditloan.com puts the average American's interest payments on debt at $600,000 over the course of a lifetime. By avoiding the majority of this amount in interest on debt (we've only paid about $20,000 in combined interest total on things like student loans and a mortgage over the years), we hope to need lesser overall earnings, allowing us to save more of what we do make rather than paying it toward debt.
Aversion to stocks
Our family has had some bad luck with stocks throughout the years. This downward tend started with my grandfather and has continued into the current generation with me.
To combat some of my aversion to stocks, yet still utilize the market to help plan for retirement, I've done several things. First off, when I left my job in hotels, I eventually rolled my 401(k) into an IRA that was centered upon a dividend reinvestment plan. This plan provides stability through a well diversified fund portfolio, but it also seeks to grow my investment through monthly dividends that are reinvested into the plan as additional shares.
Secondly, I've conformed to the belief that retirement must be made up of multiple types of investments. I've tried not to focus only on the stock market or Social Security as my retirement income, but an across the board strategy to create a more secure retirement plan and one that avoids putting all our eggs in one basket.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
- Personal Finance - Career & Education
- Retirement Benefits