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Got Change?

Jonathan Clements

I MESSED UP MY retirement planning—but I have few regrets.

I don’t know if or when I’ll fully retire. Arguably, I’ve been at least semi-retired for the past nine years. That’s how long I’ve gone without a fulltime job. On the other hand, during those nine years, I’ve continued to earn enough to cover my living costs and I’ve worked longer hours than at any time in my life, thanks mostly to that insatiable mistress known as HumbleDollar.

So, how did I mess up? I’ve reached age 60 with more money than I need for retirement. That might sound like bragging, but the frugality that got me here had a downside. I’ll never know for sure, but I may have enjoyed my working years more if I’d opened my wallet a tad wider, perhaps owning a more comfortable home, taking more lavish vacations and driving cars that were more reliable.

Today, I’m better about spending. I eat out once or twice a week, and I take more expensive vacations. But with all that, I still spend less than I could. As I ponder this, I think there are four lessons for retirement savers.

Prudence almost inevitably leads to over-saving. Imagine you’re in your early 20s. Ahead lies all kinds of potential financial misfortunes: unemployment, ill-health, bad financial markets, divorce, family members in financial need and much more. How can you prepare yourself? The obvious answer: Start saving like crazy and don’t let up.

To be sure, most Americans don’t do this. But for the sort of folks who read HumbleDollar—the ones who care perhaps too passionately about their future self—this sort of manic saving behavior quickly becomes second nature. By your 50s, you might realize you’re on track to have plenty saved for retirement. But by then, if you’re like me, frugality will have become a way of life and you could find it awfully hard to change.

Don’t rely on the 80% rule. One rule of thumb says you can comfortably retire on 80% of your final salary. There’s some logic to this. Upon retirement, you no longer have to pay Social Security and Medicare payroll taxes, plus you no longer need to save perhaps 10% or 15% of income for retirement, so 80% of your old salary should suffice.

But what if you’ve been socking away 20% or 30% of your income, the kids are launched into the adult world and your mortgage is paid off? You might be comfortable living on half or less of your old salary. That’s certainly true for me.

Downsizing is a game changer. In 2020, I decamped from a relatively quiet town just north of New York City and moved to Philadelphia. I made the change for a host of reasons, including a desire to return to city living and to be closer to family. Cost of living wasn’t a consideration—but maybe it should have been.

Over the past two-and-a-half years, my monthly living expenses have fallen sharply, which means I’m now spending even less than I can afford. Philadelphia home prices are a bargain compared to the New York area. My property taxes are half what they were. I no longer own a car. Restaurant prices are noticeably lower.

To be sure, Philadelphia would hardly be considered a low-cost place to live. But it’s undoubtedly cheap compared to New York City and its more affluent suburbs. Indeed, I tell folks that Philadelphia is a smaller, mellower version of New York—where everything is one-third off.

My 2020 move has made me realize how much you can save by downsizing and relocating. I mention this reluctantly—because I feel folks often make a mistake when they trade their current circle of friends for a locale with a lower cost of living. But I must confess, based on my move to Philly, I can see the potential financial savings are huge.

Money buys happiness even if we don’t spend it. Yes, in my over-saving, I missed out on spending that might have brought me added happiness. But it’s hard to know how much additional happiness that spending would have delivered, if any.

Meanwhile, I know where I stand today—and I find the money I’ve accumulated brings me ample happiness. It’s not because I’m spending somewhat more these days, though I am, and it’s not because I regularly sit back and admire my account balances. Rather, the money I’ve amassed brings me happiness because it allows me the luxury of rarely thinking about my own money. I have no worries about how much I spend because I’m confident I have enough.

Could I potentially spend more in the years ahead? I’ve been working on a retirement wish list, something I’ll write about in the weeks ahead. But I’m not sure it’ll involve spending a whole lot more. There’s a tradeoff between spending today and leaving the money to grow, so there’s more tomorrow. We need to strike a balance between the two, something I haven’t been very good at.

Now that I’ve reached my 60s, is it time to change my ways? Perhaps. It’s something I regularly think about. But for now, I’m not sure additional spending would bring me much additional pleasure—but knowing my portfolio continues to grow leaves me with a warm, fuzzy feeling of financial contentment.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.

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