Money Rehab with Nicole Lapin - Rethink Your Retirement Plan

Episode Date: December 6, 2021

On Money Rehab, Nicole has talked about best practices around getting a head start on retirement… but what if your head start has come and, well, gone? Today, Nicole breaks down creative ways to rethink your retirement plans and catch up with your goals.  To figure out your goal retirement budget, click here: https://nicolelapin.com/retirement-calculator/ Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never have. You think the whole world revolves around you and your money. Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg.

The only financial expert you don't need a dictionary to understand. Nicole Lappin. On the show, we've talked about 401ks and IRAs and Roth IRAs, the whole delicious alphabet soup that makes up the world of retirement accounts. While these are solid options for retirement, they are more powerful the earlier you get started. But what if you didn't get an early start? That's what today's money rehabber is wondering. Here he is. Hey, Nicole, my name is Chris and I live in Worcester, Mass. I got a bit of a late start saving for retirement. I just opened an IRA, but I'm in my late 40s. And so I don't really have many years to have my money work for me. What would you recommend to someone in my position?

Chris, you are in the same boat as a ton of people. Seriously, this boat needs to be like the largest cruise ship ever because it needs to hold so many people who are also worried that they got a late start on saving for retirement. I'm not going to sugarcoat the truth. Saving for retirement is much easier when you have time on your side. But I also won't dwell on that fact because that doesn't help you move forward. And yes, you can move forward. Sure, a late start when it comes to saving for

retirement is real, but there is no such thing as being too late. But because you're just getting started now, you'll need to supplement your IRA with other retirement accounts and some creative ways to rethink your retirement plans. Here are three things you can do to help catch up to your retirement goals. Number one, downsizing early. Typically, there's a phase in life when people decide it's time to downsize. This has become an unofficial part of the retirement process in America. You turn 67 and it's time to cash in on your social security and move to a smaller pad. If you find yourself trying to find ways to bulk up your retirement savings accounts, why don't you try downsizing early? If you're

living in a house with more space than you need, you're also spending more than you need to. The size of your house has a pretty obvious direct relationship to how much you're spending. A bigger house means a higher rent or mortgage, higher costs for upkeep, higher property taxes, more space, more money, more problems. If you downsize earlier, say in your 50s instead of 60s, you can take all of the money that you were spending on a pricier home and throw that cash into your retirement accounts. If you own a house, maybe you'll be able to sell it for a profit and you can put that lump sum into your retirement fund. Of course, if you own a home, you're not guaranteed to make a profit when you sell it, but that is a whole other episode anyway. Say that once you sell your house and find a new place to live, you have

$50,000 to play with. If you sold that house when you're 60 years old, put the $50,000 into retirement, assuming a 5% ROI, that investment will grow to over $70,000 by the time you're 67. Not bad. But if you sold the house at 50 and put the $50,000 into retirement, then assuming the same ROI, assuming the same ROI, you'll have over $114,000 when you're 67. That's double what you earned in the example of selling the house at 60. Unless you're headed for a super luxe Betty White retirement life, you're going to need to downsize anyway. Why not just do it now? Number two, fired movement. You may have heard of the FIRED movement, which stands for Financial Independence Retire Early. This became a popular move in the 2010s when young people would save aggressively, like 50 to 75 percent aggressively of their earnings so that they could retire by the time they were 35 or 40.

The FIRED movement, that's FIRED with a D, stands for Financial Independence Rethink Early Deadline. Did I just make this up? Yes. Am I proud of it? Also yes. Interestingly, some of the richest people out there are also the ones who work the longest. Half of the people making more than $750,000 a year say they will never stop working, yours truly included. Take these A-plus money rehabbers, for example. Oprah is 66 years old. Martha Stewart is 79 years old. Warren Buffett is 91 years old. Helen Mirren, 75 years old. Martha Stewart is 79 years old. Warren Buffett is 91 years old. Helen Mirren, 75 years old. Morgan Freeman, 84 years old.

Joe Biden. POTUS is 78 years old. I'm not here to glorify working till the grave, but it is important to think about what your preferences are now and what money you will need if those preferences change, and they likely will later on. If you retire at 70 instead of 67, you'll have three more years of income to play with. Will that help you make progress towards your retirement goals? That's a question only you can answer, but I'm guessing the answer is yes. If the idea of holding your same job until you're 70 plus makes you exhausted,

just thinking about, or just plain bored, I have another idea for you. Number three, mini retirements. What if you didn't work for 40 years to try and save a bundle for some grand finale? What if instead you added an S onto retirement and took several smaller retirements instead? Because you know I love, love, love breaking everything down into baby steps and then those steps into even tinier steps, you might not be surprised to know that I like breaking down retirement goals as well. I've decided that for the rest of my career, I'm going to aim for several mini-retirements of one or two years each.

That way, they are not only more manageable to plan for, but I can go back to work part-time or full-time or whatever I feel at that time, feeling re-energized without being totally out of the loop. I've done one mini-retirement so far. I took myself to Cabo San Lucas, Mexico to make up for missing that particular rite of passage in my teens and twenties. During those prime years, I was busy raising the career bar while other girls my age were busy dancing on it. I reserve the right to change my mind, of course. But I know that I'll be bored out of my mind in full retirement mode with no end, well, besides death, in sight. Plus, mini-retirements can help stave off burnout. If you've been thinking of burnout as a mental issue and not a money one,

well, you couldn't be more wrong. As we've talked about in some recent episodes, few things drain money and resources faster than burned-out employees. When you're disengaged, than burned out employees. When you're disengaged, everyone loses. Our healthcare system, your employer, and most of all, you. Think of all of the opportunities you're leaving on the table because you can only go after them at half speed. Nurturing your wealth and your well-being not only should, but must go hand in hand. For today's tip, you can take straight to the bank. When you're reworking your plan for retirement, start by first figuring out how much money you will need in retirement. This is an obvious step, but you would be surprised how often people skip it. You can't decide how you should be saving for retirement if you don't know how much you need in

the first place. Take a stab at trying to figure out how much you'll need for retirement if you don't know how much you need in the first place. Take a stab at trying to figure out how much you'll need for retirement. There are a bunch of free calculators out there. I have one on my website. We'll link them in the show notes and then evaluate which of the three options I laid out for you today will help you get there. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson.

Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team, Michelle Lanz for her development work, Catherine Law for her production and writing, Magic, and Brandon Dickert for his editing, engineering and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.