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Retiring in tough times

By Jennie L. Phipps ·
Wednesday, January 9, 2013
Posted: 4 pm ET

I've been writing a lot recently about retirement for people who are worried about retiring with enough money. Today, I saw a piece of advice that makes a lot of sense to me and would be useful for the millions of people doing retirement planning on a more mundane level. The advice was: "Don't retire until you have saved enough money to pay essential bills for three to five years' worth."

To know that number, you'll need a budget that reflects what you will spend. You may have some things in that budget that aren't essential, but for many of us, there isn't a lot of fat.

Let's say that number is close to $29,500 -- twice the average Social Security payout, which, according to Social Security, is what 23 percent of married couples and 46 percent of unmarried persons living in retirement rely on for 90 percent or more of their income.

At that rate, this little guideline says a two-person household needs to have salted away at least $88,500 -- or three times $29,500. If you can put away five years' worth, or $147,500, life would be better. At that rate, you could safely pull off $5,900, or 4 percent a year in income, and still expect that nest egg to last indefinitely as long as you don't spend it all.

That gives you $35,400 a year before taxes -- which will be minimal -- to live on, when you add in your Social Security benefits. If you own your home outright and you have paid off your car, could you live on that amount? If so, you'd be doing better than a lot of other people.

I plugged this income into the National Council on Aging's search engine and looked for help for which this hypothetical couple might qualify. The resulting list isn't very long, but they might get a little assistance.

You also might think about working. One of my low-income friends works 23 hours a week for minimum wage -- $7.50 an hour. She makes almost $7,000 a year and that's enough to make life lots more comfortable.

The bottom line is if you want to live well enough in your old age, keep saving -- and working -- because you'll need everything you can put aside.

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olivia thornton
January 10, 2013 at 11:39 am

I trust God. God supplies all my needs abundantly.

January 10, 2013 at 11:07 am

I have 2 small pensions from previous jobs, and my husband is getting a pension from his job. I have been saving a lot for retirement the past couple of years, and want to retire but don't get social security till I'm 62. (I am now 52.) I've been working full-time for 30 years. I'm just wondering how pensions fit into the overall retirement picture. I guess I'm wondering if they're considered more secure than social security.

January 10, 2013 at 5:47 am

I just retired two months ago at age 63. I see this recommendation frequently by finance gurus. they say if times are tight, then return to work! his makes no sense to me.
If you are retired, you are NOT supposed to work. Why not stay with your old job making a decent living until you can retire? I was self employed for 35 years and my wife and I raised two children, out them through school, and now own a home in Florida. We saved 15-20% of our income every year, and sacrificed on some things so that now we are secure for the rest of our lives. Don't do unless you can afford it.
It is much better to stay in the comfort zone do a job.

Linda Milgate
January 10, 2013 at 5:00 am

I wonder what to do if you retired early and have some health issues, have some money put aside an now an annuity. But not enough to feel safe for the future. Working even part time is now not an option, must be others like me. Please just use Lin as a name, than you.

January 09, 2013 at 11:09 pm

I just turn 60. I'm worried if I save enough to retire. How much do I need to retire comfortably if my house is paid per your observation and experiences with your millions of clientele? I'll appreciate your advise and response.