Although no one can predict whether they will have a charmed financial life or a disastrous one, having a long-term plan and sticking to it will increase your chances of arriving at retirement in style.
We asked Bankrate readers if their retirement would have them eating caviar or cat food. The responses were mixed.
Reaping the benefits of modest living
My spouse and I always lived under our means, a lower-middle-class life with a middle-class income.
We bought less house than our salaries would have supported and paid off the mortgage ahead of the 15 years. We stopped buying term insurance as soon as we could once we had no mortgage debt and relied on employer-paid plans. We bought whatever we could at salvage and discount stores, seldom ate out and took good care of our possessions.
We saved up and then took nice vacations. We had a budget and generally stuck to it, so we spent very little for interest, except for the mortgage, over the years.
We also knew that it was likely that one of us would become disabled or die before reaching retirement age, so we were careful to have long-term disability coverage insurance and took full advantage of company sponsored and subsidized savings plans such as 401(k)s . Our investments were tax-effective whenever possible. We each had a defined-benefit plan for part of our careers. Using those plans, Social Security, U.S. savings bonds, CDs and the like as the safety net, we allowed our 401(k) and IRA investments to be placed in riskier investments.
We had some funds in mutual funds that had low fees, too. Sometimes the risks were rewarded, sometimes not, but the money at risk could be risked without loss of sleep.
My spouse did become disabled about 10 years before his normal retirement date, and our careful but comfortable lifestyle could continue. When he could no longer be alone, I could stop working and care for him until his death, rather than have to pay for others to do so. And, since for most of our marriage at least one of us was working 50 to 70 hours a week, it also gave us time we never had just to be together.
We didn't plan for caviar, but cat food -- except for the cat -- isn't likely to be on the shopping list either. Notice that we did not purchase long-term-care insurance: My spouse would have been uninsurable, and since we never felt a need to leave an estate to relatives or charities upon our death, if long-term care is needed, the house will be more than sufficient to pay for it. Besides, I still believe that the rating structures for much long-term care insurance are not all that realistic. Of course, we have had the proper legal documents so that "leftovers" should be able to go to the charities and people we selected.
I guess one could call our strategy the "slow and steady" method.