Take a lesson from these folks, who are prepping their finances for their next phase.
Jill Olkoski, 49, Edmonds, Wash.
Works as: Website designer
Aiming to retire in: 2018
Olkoski learned the value of living below one’s means from her parents. “My father and mother were Depression-era folks, so saving was always really important,” she says.
Thanks to her financial discipline — saving an average 30% of her salary per year during a two-decade engineering career at Motorola — she’s on track to retire from full-time work in her 50s.
Trimming housing expenses. Two years ago, Olkoski moved from Seattle to Edmonds, which is just 12 miles north. She bought a slightly smaller home for half the price, getting rid of her mortgage in the process.
That also cut her property taxes by 50% and reduced her maintenance, insurance and utility expenses. “You don’t have to move far away from where you live to lower your costs,” says Olkoski.
As a result of the move, she’s also cut her retirement income needs, preserving the longevity of her portfolio.
Planning for health care needs. Olkoski, who started a home-based website-design business in 2006, plans to continue working at it part time in retirement. Besides providing income, this will enable her to claim a tax break on health insurance until she qualifies for Medicare.
Olkoski also plans to buy long-term care insurance. “I’m single and I want to make sure I’m taken care of if I can’t care for myself,” says Olkoski.
Boosting savings, reducing risk
Dean and LaDonna Lenz, 57 and 55, Littleton, Colo.
Work as: Mechanical engineer for an aerospace company (him), high school tech coordinator (her)
Aiming to retire in: 2017
“We want to maintain a comfortable lifestyle and do things together that we don’t have time for now,” says LaDonna.
After meeting with a financial adviser, they realized that they needed to be putting away a bit more to have the life they want — which includes sailing,scuba diving and spending more time with their new granddaughter.
So they slowly went from stashing 14% of their household income to 22%; they are also building an emergency fund to cover six to 12 months of expenses.
Dialing back investment risk. The financial adviser also made the Lenzes aware that their retirement investments were too aggressive, putting them at risk for big losses in their portfolio.
“We had nearly 40% of my 401(k) in my company stock,” says Dean. “We cut that down to 10% and have a much better balance in our investments.”
Paying off debt. The Lenzes refinanced their mortgage and last year paid off the last of the college loans they took out for their three kids.
Reducing those costs now enables them to funnel more money toward their retirement savings and will cut their fixed expenses in retirement.
Practicing her retirement life
Janice Stacy, 56, Brooklyn, N.Y.
Works as: Administrator for a city public health agency
Aiming to retire in: 2016
With plans to relocate to Atlanta, Stacy — who is single — purchased a home there three years ago. She visits once a month to get herself acclimated.
Though family and friends are the main draws, she also knows her retirement life will be richer, literally, moving to a city that’s much less expensive. “Everything is cheaper there — home prices, taxes, insurance,” says Stacy.
Designing her home for the long run. Though Stacy’s house in Atlanta is two stories and larger than her Brooklyn home, she made sure the new construction plans included a bedroom, full bathroom and laundry room on the first floor so it will be easier to age in place.
There’s also room for family if she needs to take care of her aging parents down the road.
Holding out until she vests. Stacy knows exactly when she’ll be able to retire: March 1, 2016. That’s when a military pension from a career in the Navy will kick in; she’ll also mark 25 years of service with New York City, boosting the small pension she’ll get from her current job.
Her retirement income projections show that her two pensions, plus Social Security will replace 80% of her income, so she won’t need to draw from her investments for daily living expenses.
“I’m ready for retirement,” Stacy says. “I just need to work a few more years to get there.”
Putting off tapping into her investments
Marilyn Broussard, 69, Minneapolis
Worked as: Financial planner
Retired in: January 2012
After spending a few years semi-retired, Marilyn Broussard finally tied up the loose ends and eased into retirement earlier this year.
Thanks to a small pension and a cash cushion she built up over the last few years, Broussard is able to let her investments continue to grow. “The longer they can work, the better,” she says.
Giving herself a break from budgeting. Broussard is allowing herself one year to live the way she wants — read: minimal budgeting — which has doubled as a test-drive for her spending habits in retirement. “I’ve realized now they’re not sustainable,” she says with a laugh.
For the time being, she’s enjoying more time on the town; plus, she’s getting some long-postponed repairs and purchases squared away, but she’s also…
Planning to dial back soon. Starting in year two, Broussard will hunker down and stick to a spending plan, on a lower income that her projections show that her assets can support for a long retirement. “I’ll do what the numbers tell me,” she says.