Monday, May 5, 2014

Save or Starve in Retirement: The Choice is Yours

Squirrel sits on a rock with acorn
Even a Squirrel Saves for the Future

Our government saw starvation first hand after the Great Depression of the 1930s and realized a need to take care of elderly Americans with Social Security, so starvation was not the way to die. In the 1960s, Congress tackled Medicare so that lack of medical care for the elderly was not the way to die. Now, fifty years later, the Affordable Care Act helps Americans of all ages have health insurance and Social Security and Medicare are still in effect. But without careful planning, elderly Americans can still die of starvation or lack of good medical care. How could this happen?

If you don’t save money during your working years, you won’t have enough money to pay your portion of Medicare or your needs not covered by Social Security, because neither program covers all your expenses. The government intended for Social Security to cover only part of your needs, because at the time, most Americans had a pension plan at work. Company-paid pension plans are now personalized -- you have to make the contribution to a retirement plan before your employer pays any part of it. Many of us live for today and don't make the contribution. If your employer gives you free money, why turn it down?

Social Security covers 40 to 50 percent of your pre-retirement income, and out of that money must come your Part B or medical coverage and maybe Part D for prescription insurance coverage. Part A, or hospitalization coverage, has a deductible as well. If you go to the hospital, you are responsible for the deductible.

No matter how much or how little money you earn, you can save some money for your future. You need six to eight months of expenses saved in an emergency fund. This fund can also be the start of your retirement fund. We waste more money in the United States than people in many countries have to live on. We buy trinkets, junk, more clothing than we can wear, jewelry, and memberships we don’t use. Think through your lifestyle and what you need, and pare down to save for your future. It’s a horrible thought that we might die of starvation in America, but it happens. Older Americans today are choosing between food and medicine, according to the AARP Foundation.
Start now. 

You’ll be more relaxed with money in the bank to cover emergencies and may even live longer as a result of less stress. Have money taken out of your paycheck to cover a 401(k) or Roth 401(k), or set up an IRA for yourself by contacting your bank. I'll confess that when we were 40, we thought we had many years to build a retirement fund. Twenty-five years later, we realize the importance of saving early to let the money accumulate interest, so we don't have to work for every dime.

Spend less.

One of the easy ways to spend less is to cook at home instead of eating out. Cook vegetables, serve fruits, and don’t use starter mixes like helpers. 

Buy bleach, hydrogen peroxide, baking soda and vinegar for cleaning supplies instead of squirt bottles of something you can’t identify that is heavily perfumed. 

Shop when you need something, and don’t use shopping as your recreation. 

Go to the park, library or zoo for free entertainment, instead of spending your money on tickets for activities you may not even enjoy. 

Review your bills and cut expenses where you can. Expenses you incur every month are bites out of your future funds. Call your utility companies and ask for better rates. Telephone, cell phone, cable, electricity, alarm systems and internet services all have loyalty or retention programs to keep customers once they have them. 

Buy used.

If you need something, call thrift stores and see if they have the item available. Buy clothing at thrift or bargain stores. If you’re afraid someone may see you or recognize something you’ve bought, go to the next town to shop at their thrift stores. We frequent thrift stores and have made friends with the clerks and other thrifty people. Some of our thrifty friends own businesses, a couple are in real estate sales, and others are retired. 

Don’t pay interest.

Save money by paying for purchases in cash or paying with credit cards that you pay in full every month. It’s shocking to see how much money Americans spend on financing. Dinner out for $100 should be $100, not $125 because you didn’t pay the credit card on time. Make it your goal to pay credit cards every month or don’t charge anything you can't pay off that month. You're borrowing against your future when you charge more than you can pay this month. Your future is money you need in retirement. 

Live Modestly.

You don't need a new house or an electronics upgrade every few years. Living in the same house saves moving expenses, larger payments and contributes to your overall wealth. Pay for what you have, and appreciate it.

Think of your future every time you spend money. 

Picture yourself too old to get a job and choosing between medicine and food. It’s your wake-up call.