Monday, October 25, 2021

Time To Retire Is In Your 20s!




Written by JIM “Gymbeaux” BRQWN, October 25, 2021

We all have dreams of what it would or could be like to retire.  If those folks are like me, they probably did an analysis of their total income and their KNOWN expense items to determine if they can afford to retire. I did this and was actually surprised that we thought we could financially retire. In other words, we had sufficient income to pay our KNOWN bills and still had some left over at the end of each month.  I used an EXCEL Spreadsheet to IDENTIFY each form of income and then to IDENTIFY and RECOGNIZE every type of expense we would encounter on a regular basis.  The key words are “on a regular basis.“  When you put it on paper, you suddenly realize just how ill prepared you are because you lose site of some expenses, especially those that happen only once a year like Flood Insurance, gifts, unexpected home repairs, etc.    We will never be what I would call a rich family but it was obvious I could retire, pay my bills and even have some money left over at the end of each month; we should be comfortable, not what I would call wealthy, just comfortable. 

My first shock came with the cost of dental care.  We all know or should know that we usually need more dental care the older we get. The cost is over the top!!! Be prepared! There is no other way to say this.  DENTAL CARE IS EXTREMELY EXPENSIVE AND MOST INSURANCE POLICIES ONLY COVER A SMALL PERCENTAGE OF THE COST – BE PREPARED!  PLAN ACCORDINGLY! 

My second BIG shock came in 2021 when President Joe Biden changed everything with his policies that drove UP almost every price of every commodity. The problem is that my retirement income did not go up with the increase in PRICES.  Put another way, the increase in my personal EXPENSES have gone out of sight, thanks to all the moronic policies coming out of Washington DC while most of my income remains fixed, most but not all.   Financially that is taking HUGE backward steps!  I knew there were elements without our society who felt Socialism was a viable form of government but I never thought I would see the day that it would actually happen. 

Here is a list of personal items that have increased in ADDITION to the normal things one would buy during any given month, like groceries. 

  • Homeowners Insurance increased over $800 a year
  • Flood Insurance, the numbers are not in yet but it is expected to increase at least $120 a year
  • Cable TV, increased about $40 a month or $480 more a year
  • Natural Gas.  I don't know the actual increase as yet but was advised it will be increasing
  • Electricity, also received a letter stating the rates are increasing.
  • Car Insurance.  Increased, not by a lot, but an increase none the same.
  • Dental Coverage.  Being a retired military family, our health and dental insurance is excellent but does not match the promises made by the Government as to our expected coverage when we all made the decision to make the military a career - deductible costs are increasing and dental care is NOT covered as promised.  We are encouraged to acquire Dental Insurance at a monthly cost only to find out that the cost of dental care is only partially covered and the insureds must pay the difference which has been substantial!!!!!
  • Gifts, not just for the immediate family but also for weddings, showers, birthdays, anniversaries, etc. Do you know how much you spend on gifts? You should because they are expense items that need to be included in your family budget calculations
  • Property Taxes, thankfully Louisiana FREEZES our property taxes once I reached the age of 65 but if you move, you begin to pay a higher property tax rate and then that amount would be frozen at THAT rate
  • Car repairs, have you had to have a repair performed lately? It costs about $100 just to drive in and have your car "looked at" to determine what is wrong.
  • Interest income: Almost a joke when you see how little interest your money earns in traditional savings type accounts
  • Cost of Living Adjustments. Most cost-of-living adjustments that are calculated and paid for by our Government, are not enough to buy a coffee at Starbucks; example, annual increases to Social Security and my military retirement compensation.
  • Cell Phones.  The cost of cell phones has gone down and up at the same time.  It is easy to be caught up in always believing you “NEED” the latest and greatest phone being offered and they are NOT cheap.  The basic cost of service has come down because of competition but you quickly learn that the basic service is rarely adequate enough to cover your REAL data usage so you add data and that ads to the cost of the phone service.  Our phone bills increased by $50 a month because of the increased data usage.
  • Internet Service.  Like the cell phones, we acquired internet service and it was “reasonable” but then over time it too has increased in cost. 

We had a very large and tall Water Oak in our backyard.  It was a beautiful tree.  I noticed that during violent storms, large branches would break off and fall into the yard.  I began to take a closer look at the tree and given that we live in an area frequented by hurricanes, I began to worry about the durability of this massive tree growing so close to our home.  If it should ever fall, it would crush our home.  With my neighbor’s agreement, I decided to have the tree removed.  It cost over $7,000 to have this tree removed and the ground somewhat restored.  I obtained multiple bids just to make certain the cost was reasonable which it was. 

It would be almost impossible to live in 2021 in the South without air conditioning.  Our home has a unique water sourced system that involves two interior A/C units and an external water pump and storage tank.  Since retiring, I have had to replace both interior units AND the external water pump.  Total cost of these three repairs were in excess of $9,000, none of which had I planned on at least this soon after retiring. 

The point I am trying to pass along is this.  You can plan for routine expenses and expected income but you can’t really plan enough for the unknown expenses like insane economic policies, broken fixtures in your home, removal of a massive tree, etc.   Therefore, before you make a decision to retire, you really need to consider a “what if” plan of action for such unplanned expenses.  In my opinion, this is critical to putting into place an effective retirement plan. 

Long before you reach your retirement age, you must learn to understand the difference between “like to have” and “must have.”  As I type this, I am looking at a perfect example just over the screen where I can see NINE coffee cups with Coast Guard logos on them (they are all different).  It is sort of a collection of Coast Guard coffee mugs.  I have more downstairs in the kitchen cabinet.  Do I “must have” these cups or are they more of a “like to have” item?  I absolutely do not NEED these mugs.  Would I “like to have them”, yes but I can’t explain why but I certainly do not have a specific NEED in my life for them.  Everything in the material world falls into one of these two categories.  Before you spend your money, especially if you have to charge the item(s), just ask yourself this question.  Is this item a MUST HAVE or is it a LIKE TO HAVE item?  If yes, buy it, if no, think twice before you buy it.  If you do this, you will discover what I have learned.  When you stop and take the time to just ask this one question, you tend to buy a lot less “stuff” you really don’t need.  Now I have to figure out how to get rid of all the stuff I have, don’t need, and just take up space. 

The point I am trying to make for people considering Retirement, is this. Plan to the maximum change as much as possible. Don't assume that everything will remain the same in regard to the economy that exists at the time leading up to your retirement. Things change and 2021 proves that no matter how much you plan, some of the upcoming changes could be disastrous to your financial position in life. 

Final lesson. As you reduce your expenses and do your best to survive in your retirement, the cost of living will increase faster and higher than you expected. This creates an ever-increasing difference between YOUR COST OF LIVING (that you planned for) and the REAL COST OF LIVING, two numbers rarely being the same.   This is why there is such a huge gap that continues to widen in personal finances between those who have retired (me) and those who continue to work (you). 

The above reflects my experience in retirement. It may not reflect what happens to everyone but I would bet there are more people like me than not like me. Make certain of your potential income and expenses LONG BEFORE you make the decision to retire.  Attend financial seminars given in almost every area of the country by financial experts.  Learn what it takes to be able to pay for the lifestyle you desire in your retired years.  What will you do?  Where will you live?  Will you buy a larger home?  Will you buy a smaller home?  Will you rent instead of buy?  What kind of car do you want to own?  Will you eventually have to replace it?  If so, how will you pay for it?  The list is endless.  How much will you have to continue to earn to live the life you want to live? 

MOST IMPORTANT LESSON OF ALL!  The time to prepare for retirement is not when you reach your 50s or 60s, the time to begin preparing is when you are in your 20s.  What do you want your life to look like after you retire?  Then create a plan to accomplish those things NOW that will lead to you being able to retire as you desire, not as you must.  In this regard, I would suggest that you read two books. 

The Richest Man in Babylon written by George Classon.  Kindle version costs only $1.99.  The number one lesson from the book – PAY YOURSELF FIRST! 

The Wealthy Barber written by David Chilton.  If you want to do your children a favor, buy each of them this book!  Priceless. 

A third book would also be very beneficial. 

The Millionaire Next Door written by William Danko.  Number one lesson from this book is that people who earn their way to becoming millionaires usually do so by NOT flaunting their wealth or by buying large homes and expensive cars, quite the contrary.  Very good book, again especially for teenagers to read.  

It will be too late if you wait until your 50s or 60s to read such books!  The time to plan for your retirement is when you are in your 20s, not your 60s!