Mon. Dec 4th, 2023

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In my 20s and 30s, retirement savings seemed like a pipe dream, something that other, more responsible people did. I was an artist, a dreamer. My plan was that (a) I would become so wealthy through my creative endeavors that I had plenty of money for retirement, or (b) I would never retire and just keep on working.

During my years as a craftsperson, I met plenty of colleagues who chose option (b) and continued working into old age. I didn’t see any artists getting rich. Still, I thought of retirement as a problem I would deal with in some far-off future. I even spent down a retirement account an employer had set aside for me because I wanted the funds to grow my business (I now regret that decision).

I started my retirement savings during ten years when I worked for an employer that matched contributions. It was easy to set aside a portion of my paycheck, and I finally began to accumulate retirement savings.

When I left that job to work as a freelancer, my first thought was that I couldn’t afford to put money into my IRA, at least for a while. However, at that same time, I started to manage my parents’ finances. That has given me a whole new perspective on the importance of saving for retirement.

How not to save money

My parents, both now in their 90s, grew up during the Great Depression. My mother’s parents were immigrants, and my father was raised by a single mother. Their working-class roots didn’t prepare them to manage their retirement finances. 

When my sister and I stepped in to help them (okay, force them) to move to a retirement community, they were living very close to the bone. They lived in the same low-rent apartment they had lived in for 40 years, were frugal about food, and didn’t spend money on much else. Even though my father’s pension was generous, they had no idea how much money they had and were fearful that they were one step away from the poorhouse.

My sister turned into a forensic accountant and tracked down the many CDs and money market accounts where they had stashed bits of cash. It turned out that they had quite a bit of money saved up. That money made a big difference in their move. 

We looked at a lot of very depressing but cheap senior facilities. After we discovered they had savings, we could choose an independent living unit in a well-run senior community with beautiful grounds. Their savings paid for the entry fee (more than $90,000) and qualified them to move in. 

The monthly rent was almost ten times what my parents had paid for their old apartment, but that was still well within their means. When they needed to move to units where they could get extra assistance, the expenses piled up, and their savings dwindled.

As I watched their financial obligations balloon while their income stayed fixed, I had to take a hard look at my retirement finances. My new perspective was more of a slow dawning of awareness than a bolt of lightning. But after getting a window into the financial realities of retirement, I’ve changed my approach to both work and savings.

Key takeaways from managing my parents’ retirement finances

I don’t have an employer to match my retirement savings now, so the onus is on me to fund my retirement accounts fully. Here are some of the takeaways that guide my retirement planning.

Every year’s income has to do double duty now

I know that I work not just to pay this year’s expenses but to pay for a year of retirement, too. I work hard to maximize my income, and I live a little more frugally so I can put more money into my retirement account.

Professional help pays off

One of the best things we did for my parents was to get help from an elder care law firm. The staff has guided us through every difficult decision we’ve had to make over the past several years, from signing the contract with the senior living facility to applying for benefits to help pay for their care. My wife and I took a cue from my parents and got our CFP to analyze our finances and advise us on saving enough for retirement. We keep retirement in mind as we make financial decisions now.

Reduced living expenses will help me stretch out my retirement income

My parents were able to save money in early retirement because their living expenses were low. Those savings were vital when they needed a higher level of care. They lived in a small town where rents are minimal, and I live in the expensive Bay Area. Still, by staying in our tiny condo rather than buying a bigger home, my wife and I can conserve our resources and pay off our mortgage sooner. Mortgage-free living will help us survive on our retirement income.

How much retirement savings is enough?

After witnessing the cost of end of life care for my parents, I aim to have half a million dollars saved by the time I retire. It sounds like a lot, but the later years in life can get expensive, and I intend to live to be at least 103. I’ll meet my goal partly through contributions and partly through investments. I hope. I still have a long way to go. 

Laura McCamy is a freelance writer based in the San Francisco Bay Area who has written about tax filing, saving money, cutting expenses, and retirement savings.

By senior