My parents never had money worries as pensioners – because they followed five rules throughout their lives
- In their early 60s, my parents retired and enjoyed a comfortable retirement for more than 25 years.
- In retirement, they had multiple sources of income, including a rental property and investment accounts.
- During their working lives, they never had high interest debt and invested in long-term care insurance to cover expenses later in life.
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My parents both retired in their early 60s. They had enough money and regular income to live comfortably for more than 25 years. My father died eight years ago, but my mother is still alive and is now 86 years old.
The years of retirement they spent summers in vermont and went fishing almost every weekend at lake champlain. They were in florida for the winter. In both places, they had a modest home and a small boat, in addition to their primary residence and investment property in the Berkshire mountains in western Massachusetts.
They were by no means wealthy – my father grew up on a small farm and ran an auto parts business. My mother, the daughter of polish immigrants who worked in the textile factories in my hometown, was a secretary. They were never spendthrifts, but they knew instinctively when something was worth spending money on and when to save it.
While my own financial circumstances are very different from those of my parents. yet their example has shown me how to manage money and plan for my own retirement. These are the things I learned:
Debt is usually not a friend
every bill my parents received they paid immediately. They also never carried a credit card and only made large purchases if they could pay cash for them.
The big exception was when, more than 50 years ago, they bought not only the two-family house where they had previously been renting, but also the two-family house next door. At the time, my father was able to arrange 100 percent financing with a local banker whose car he worked on and trusted. After 27 years, he had paid off that loan.
He also refused to go into debt to pay for college. And so, in addition to his day job, he plowed snow at night to earn extra money to pay for my college tuition. The greatest gift my parents gave me was a debt-free college education. However, they insisted that I take out a small loan during my senior year of high school so that I could get a good credit score.
Make saving a constant habit, no matter how much you earn
My parents saved for themselves, for me and ultimately for their grandchildren. When she was still working, my mother opened savings accounts for both of my children. From each of their salaries, they deposited ten or 15 dollars into these accounts. They closed the accounts as then 3 each.and gave the money to me and my husband, and we in turn invested it for our children.
We thought it would be a good idea to buy them some apple stock, and that turned out to be a pretty good decision. Now they each have their own shares, which were originally financed by their very hardworking "babci. Hopefully her grandma’s example will influence her own financial decisions in the future.
Pay extra into your employer’s retirement account or take out an individual pension plan
Although my parents earned only modest salaries, they were very committed to paying into their respective employers’ retirement plans. For those who are short on money, it’s easy to be convinced that they can’t possibly give up even one cent of their paycheck. Even small additional amounts that add up over the years, especially if your employer pays your insurance premium, are enough.
If, on the other hand, you are self-employed, as I am, then open an individual retirement account and pay into it conscientiously. That way, you’ll ultimately have another source of income to rely on in your retirement years.
Take out long-term care insurance
And do it now, while you are still young and healthy. seriously right now. The younger you are, the cheaper it is. If you are not wealthy, chances are that you will need it.
While chronic health problems prevented my father from purchasing long-term care insurance, my mother did when she was 64. She recently moved into an assisted living facility and is now benefiting from the insurance benefits.
The rent on their new apartment is about the same as a modest one-bedroom in a good neighborhood in brooklyn. So without the insurance, it would be unaffordable. The national median cost of assisted living in america is 4.000 dollars a month and the average length of stay is two and a half to three years. Since the health insurance does not cover these costs, you would have to pay about 144.000 dollars or possibly much more if you need medical care for memory problems.
I know this is not something you want to think about right now. Nevertheless, I advise you to do it anyway. My husband and I both have long-term care insurance. I am confident that it will ease the burden on both our children and our assets should we need assisted living in the decades to come.
Invest in a regular source of income
Now that I’m taking care of my mother’s finances, I understand that retirement income comes from many different sources. Most people will not be able to retire on their social security benefits alone. So it’s important to have other sources of regular income.
my parents never had a lot of shares, but they kept the two houses they bought in 1968 for 15.000 dollars and lived most of their married life on the first floor of one of the two houses. Managing property can be a headache at times and is certainly not for everyone. But these properties, which have been unencumbered by mortgages for many years, provide my mother with an important regular source of money. And I know that if she survives the benefits of her long-term care insurance, her sale or mortgage will bring in enough money for her to continue to live carefree.
This article appeared on business insider back in december 2020. It has now been reviewed and updated.