I spilled my guts about one of the reasons retirement is going to be later rather than on time: I have debt (see the ugliness in Part 1). Yet it’s not only debt that gets me behind. I need more savings.
Why I Can’t Retire Early: Not EnOUGh Savings to Retire
Some people have enough money saved from a retirement plan at work, like a 401k. Some people have enough money saved from an individual retirement plan, like an IRA. Then there are those of us who have saved “some” money.
In other words, there’s not enough to live on for who knows how many years of retirement (wouldn’t retirement planning be so much easier if you knew the exact year you kick the bucket?).
Here are possible ways to have enough money for retirement:
- Pensions: you work long and hard at a job and you retire with a percentage of your regular pay (100% is nice!).
- Employee retirement accounts: here’s where 401(k)s, 403(b)s, RRSPs (Registered Retirement Savings Plans for Canadians) help most of us save up a big chunk of change. Not all employers offer these, but if they do, it’s a great way to retire with enough money. You have to contribute regularly, but over time your funds can build to something big enough to help you survive retirement.
- Government pensions: In the United States we have Social Security (SS). Australia has the Age Pension. Canada has the Old Age Security (OAS). The U.K. has the State Pension. These retirement funds are for anyone who reaches a specified retirement age.
- Continue working: this is happening for a lot of older workers. Whether you continue to work full time at your current job or if you take on a new part-time job to bring in more money, working later is something that can help you with affording to retire from a full-time job.
My Current Status
So I have debt, but I have a home. I have a mortgage, but I have a decent salary. Oh, and my job comes with a 403(b) plan. A 403(b) is the public sector version of a 401(k).
I started working for this organization back in the 1990s. Employment at this organization comes with a state pension. If I worked long enough at this place I could retire with a payment that is half of my regular pay. Wow! I’m set.
What happens if I agreed to NOT be on the state retirement plan?
Um…yes, you could do that. Why would you do a silly thing like that? I was offered a doubling of what I had saved to that point for retirement if it all was put in the 403(b) and I signed away my expectations for using the state retirement system.
Yay! I had an instant increase in my savings. At the time I had $30,000 or so, and now I had $60,000. This was a sign I would retire with plenty of money.
My Old Intelligent but Outdated Plan
- I’d eventually be able to increase my withdrawals to get the employer match of my paycheck deductions,
- Then later I would surely have enough money each paycheck to deduct from my paycheck the amount that meets the annual maximum allowed for my 403(b).
- Then by the time I retire there would be up to the million or so dollars in that flush retirement account.
That was an intelligent plan, and it was one that allowed time to be on my side. What happened to that intelligent plan? Um…that plan failed. Only one of these things happened: I eventually got around to deducting the maximum of my employer’s match on the account.
Oh, and of course the returns in the stock market averages 7% annually. Riiiiight. How many stock market crashes have we had since the late 1990s? Yes, some years were good, but boy, when it goes bad, it goes real bad.
So, since sometime in the late 1990s, I’ve saved up close to $170,000 in my 403(b). I’m still not maxing out what I could save in the 403(b) each year (remember that pesky debt interfering with my money flow?).
As for regular savings, I have an emergency fund of $1000. I also have money saved for various needs. My old truck needs its repairs to keep going, so I’ve saved about $1000 for some upcoming maintenance. There are home repairs, pet costs (vets and grooming), and Christmas that take up a lot of my funds in savings. I also have enough saved up to pay the bills for next month.
On the bright side of my savings woes, I’ve improved my finances enough to save up more money while also paying down my debt.
Where I Stand Now
Though I’ve done great paying down on my debt the last six months, I still have almost $30,000 in consumer debt. I also still owe over $200,000 on my mortgage.
I have about $170,000 in my 403(b), over $1,000 in my designated emergency fund account, and another $4,000 saved up for various sinking funds and next month’s bills.
There isn’t enough to spare to put more in any retirement accounts. Not yet.
What About You?
Are you also looking at your retirement funds? Did you start earlier than me and saved more regularly? Or have you barely started on saving money in any kind of retirement account?
I would love to hear from you. What can we work on together to help us succeed with our retirement planning?
Who else is retiring later than hoped due to not enough savings to retire?