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Saving for retirement isn’t a one-size-fits-all approach. Certified financial planner (CFP) Kevin Lum said some people are in better shape than they think, but fear still hits when they see headlines like “$2M retirement savings are ‘chump change’.”
one in recent videosLum said she’s noticed five different qualities in retirees that make them better off than they thought. According to Lum, here is a description of the symptoms.
they spend sparingly
Lum calls this retiree a “modest spender Molly,” someone who enjoys life “without upgrading everything.” He said, “Real wealth is not how much you have. It is how much you need.”
The financial planner said the population of millions could still feel stressed if their lifestyle is expensive or they have low margins. His argument is that when you build margin into your life, you can live on less than you thought.
they are debt-free
Lum describes “Debt-Free Donald” as someone who “owes nothing to anyone. No mortgage, no car payment, no monthly obligations quietly draining his cash flow.”
Without credit, the required income may be “surprisingly low”. This way, Social Security and modest savings can cover essential expenses. Low fixed costs create flexibility that even large portfolios alone cannot guarantee.
they have guaranteed income
Lum introduced the “Guaranteed Income Guarantee”, whose essential expenses are covered by Social Security, pensions or annuities. When core costs are covered by reliable income, retirees “can be much better off than someone with millions of dollars in a tax-deferred IRA.”
Guaranteed income “appears no matter what the market is doing”, which reduces risk and gives investments more time to grow.
Their healthcare is covered
Healthcare is one of the biggest unknowns of retirement. “Aside from taxes, health care is one of the biggest expenses you’ll face in retirement,” Lum said.
Retirees with reliable coverage through pensions, Veterans Affairs benefits or long-term care insurance eliminate one of the biggest risks of retirement. That security can prevent fear-based decisions, like saving excessively or delaying retirement unnecessarily.
They have flexible spending plans
Lum’s final example, “Flexible Fran”, understands which expenses are fixed and which are discretionary, which allows her to adjust when needed. Flexibility in her spending plan “will often allow her to spend more money in her retirement” because she can adapt rather than follow strict rules.
Lum cites the popular 4% retirement rule as an example of a rigid withdrawal strategy that is often difficult to follow because expenses fluctuate. Alternatively, he points out that a dynamic plan helps retirees preserve assets in down markets while spending more in stronger years.