November 01, 2017 Finance

7 Ways to Make Up for Lost Retirement-Planning Time

By G.M. Filisko

There probably aren’t many people nearing retirement who feel as though they’ve done everything right and saved the perfect amount of money to live happily for however long their retirement stretches.

Some people might be perfectly fine, but they still worry. Others, however, do admit that they got a late start or haven’t been as diligent as they could have been over the years. And as a lawyer, you may be particularly at risk of not having planned well enough.

“Attorneys typically spend so much time and energy safeguarding and putting forward their clients’ interests that they have few spare moments to manage their own finances,” states Ryan McPherson, CFP®, EA, managing member at Intelligent Worth in Atlanta. “This often leads to financial disorganization. When combined with deficit spending from years of lifestyle inflation, the reality of not being prepared for retirement is too common.”

Of course, the longer you have before retirement, the more of an advantage you have in catching up. “Fifty is a pivotal age,” says McPherson. “You’re 10 to 15 years away from retirement and still have enough time to make major changes, if needed.”

Older than 50? There’s still time. If you’re ready to dig in and start socking away for your retirement, the question is: Can you put away even more than you realize? Probably, say many financial experts. In fact, here are seven ideas these advisors are recommending that their clients do to build retirement funds faster than they ever though they could.

1. Give your kids some tough love. This is a big one. Financial expert after financial expert said some variation on this theme: Stop financially supporting your adult children.

“Monetarily supporting adult children is expensive while you’re working,” says McPherson. “It also becomes very difficult to continue once you’ve retired unless you’ve amassed a tremendous amount of money or the monetary support you provide is small compared to your investments and savings.”

Robert Baltzell, president of RLB Financial in Los Angeles, agrees. “Paying for adult children is one of the largest expenses facing people in their 50s,” he asserts. “It’s time to let them swim on their own. Many parents are still paying for housing, college, and weddings. But they really need to start thinking about their end game.”

Admittedly, that’s easier said than done. “Paying for adult children can also trigger emotional problems for many people,” says Baltzell. “I hear over and over again how people feel like they’ll never be able to stop working. Once they stop paying for college, down payments on a home, and other living expenses for their children, finding money to save will be easier.”

Are you already rebelling? You just can’t, you insist. Your children just aren’t secure financially. Fair enough.

“If you can’t stop supporting them completely, at least decrease the level of monetary support over a period of years,” recommends McPherson. “It’s OK to inform your adult children that you can’t continue to support them and expect to retire at any reasonable age. The ‘savings’ you have from no longer supporting your adult children can now go toward your retirement.”

Or, here’s another idea to get started down a better path: Get your adult children to start contributing more, however small it starts. “Ask your adult children what financial contributions they can make toward the household,” suggests Kristen Edens, the founder of Grandparents in Business & Making Midlife Better, a blog about money, retirement, and the sandwich generation.

“Easily overlooked are contributing to utilities, mortgage payments, property taxes, house maintenance, and so on,” says Edens. “Have them contribute monthly to the household so that when something needs improvement, it doesn’t pinch your budget as much.”

At the very least, start raising the issue, recommends Joan Marie Gagnon, CPA, CFP, of Mansfield, Mass., who holds a master’s degree in taxation. “If you’ve been helping family members financially for years,” she states, “start the conversation with family now that it won’t be an option anymore.”

2. Pick the low-hanging fruit, if you’ve been fancy-free with your money until now. “Historically, we’ve seen the biggest and easiest places to cut expenses are dining out, shopping, reducing debt, and caring for adult children,” says Brandon D. LaValley, who holds a master’s degree in personal financial planning and is a founding partner and advisor at Targeted Wealth Solutions LLC in Colorado Springs, Colo. “Often, reducing these expenses and investing the difference can make a big impact on retirement savings.”

Gagnon says high net-worth people like lawyers can often cut on such high-end purchases as wine, cigars, and personal care. “Do you really need that massage and manicure and so forth every week?” she asks. “My clients have complained at times that they just can’t do without some things. But in most cases, it’s the frequency that can be adjusted.”

One more easy way to kick-start your retirement is to take employer contributions. “We’re frequently surprised when we encounter working adults who aren’t taking advantage of the free money their employers are offering in the form of matching 401(k) contributions,” says LaValley. “This is often 3 percent of salary or more.”

3. Downsize your home. “This will reduce all kinds of expenses, from utilities and insurance to maintenance and taxes,” contends Mitchell Walker of Mt. Pleasant, Texas. Walker spent 15 years as vice president of finance for a Berkshire Hathaway company and was a managing partner in a tax preparation and bookkeeping business; he’s the author of The Pouch Plan Budget.

“Most people in their 50s should be empty nesters or very close to it and probably don’t need all the house they needed earlier in life,” states Walker. “Since this is usually the largest single expense for most people, you can make the greatest change by doing this one thing.”

Walker admits that there are expenses that come with selling a home, and most people don’t consider them when calculating their so-called gain on the sale of their home. There could also be moving expenses and other miscellaneous items that also run up the cost of downsizing, he says. But he still contends that the potential for upside is huge, and you should at least run the calculations to determine how big a benefit you’ll recover.

4. Give your insurance coverages a serious once-over. Insurance is a double-edged sword. You need it, but maybe you don’t need every type available. Maybe you also don’t need ridiculously high coverage amounts and low deductibles.

First, be sure you have what’s needed to protect you and your family. “Review all your insurance policies to be sure your assets are protected,” states Gagnon. “If an incident occurs, it’ll be difficult to recover if your insurance is insufficient.”

That said, you may not need every policy on which you’ve been paying. “Drop unneeded insurance,” asserts McPherson. “Many people smartly purchase insurance coverage when their children are young or if their spouse depends on their income. If your children are financially independent and no one else relies on your income, you may want to consider dropping unnecessary coverage. There’s little need to pay for policies that have outlived their purpose.”

However, don’t do that without the proper guidance, adds McPherson. “A financial planner would need to review your situation and current policies to advise on whether dropping them makes sense,” he says. “But you can direct the saved premium dollars toward your retirement savings or pay down debt.”

5. Stop worrying about what others think. “Don’t buy new cars,” says Ilene Davis, CFP, MBA, an independent financial consultant in Cocoa, Fla. “Buy one that’s a couple of years old so that most depreciation is included in the price, and then take care of it. Buy it for transportation, not for status.”

Davis also recommends having friends over instead of going out to dinner and doing potluck events. “If your current friends are offended, find new friends who also want to build wealth,” she states.

If that doesn’t sit right with you, Davis suggests you give it a fair shot before dismissing it altogether. “For what it’s worth, I’m 67 and worth several million dollars and still do all those things,” she says. “Why waste money when it takes so little to do those things?

“And the sad fact is that many professionals, including doctors and lawyers, may have maxed their retirement plan contributions, but outside of that, they’ve often saved little and spent big,” she contends. “The net result is that the amount they need for their desired retirement is much more than others of lower income.”

In fact, Gagnon advises that you get your friends and family involved in your new wealth-building efforts. “Brainstorm ideas with your partner, your spouse, and your friends,” she recommends. “It’s amazing the ideas that come about.”

6. Don’t get too aggressive. “One thing many people in their 50s do to make up for lost time is get into riskier investments,” states Davis. “Often, that does more damage than good. I definitely recommend investing for growth, particularly if you have 10 years until your likely retirement, and that you set up enough in cash as you approach retirement to provide for the first two to three years of living expenses. But the real key, in my personal opinion, is to get your spending under control. The less income you need in retirement, the less money you’ll need to accumulate.”

7. Pick up sticks and head somewhere cheaper. That’s the advice of Edgard Baqueiro, managing partner of Seguros B&C in Mexico City; he’s an insurance agent with 20 years of health insurance and retirement planning. “Let’s face it,” he says. “Life in the United States is very expensive compared to many other places around the world, and too many people have neglected their retirement accounts by saving too little.

“For many years, Americans have come to Mexico to retire,” says Baqueiro. “But nowadays there’s a new kind of immigration—people who sold their house in the United States and found a way to work remotely so they continue earning American-sized incomes but are paying Mexican or other foreign-sized expenses.”

In the past 10 years, Baqueiro says, places like Ajijc, in the state of Jalisco, and San Miguel de Allende have seen a constant flow of American immigrants who moved to Mexico looking to reduce their expenses and save more money.

This type of move isn’t for the faint of heart. “Moving to another country is probably for the adventurous retiree,” says Gagnon. “Years ago, Costa Rica and Guatemala were popular for ex-patriots, but some areas of those countries have become dangerous. So it is risky.”

Gagnon says she knows people who’ve downsized and moved to lower cost of living areas in the United States and other countries, including both Mexico and Ecuador. “Downsizing and moving to another state or country isn’t for everyone,” she admits. “But if you plan ahead, it might just be viable. Also, some retirees move 5–10 years after they’ve retired. By then, they’ve had time to adjust and know what they really want. So this doesn’t have to be immediately upon retirement.

“For a move like that, it’s best to test out the location, which might involve renting a house there for a month or so,” suggests Gagnon. “It works well, too, if your family hasn’t lived nearby for a while anyway. That way, you really aren’t leaving them; you’re just moving to a new location.”

Maybe you’re thinking that some of these ideas don’t seem like they’ll make much difference?

Edens disagrees. “Each day may seem like pennies, but over time, it adds up,” she says. “Getting started with small ideas and habits gets you seeking out opportunities to find other ways to save.”

G.M. Filisko

G.M. Filisko is a Chicago-based lawyer and writer.