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Savings Challenge

Retirement Is Possible for Cheapskates

Start now by downsizing your expenses so you can retire comfortably

My friends Chuck and Doris had a financial epiphany about two years ago when the Great Recession made them rethink what a comfortable retirement would look like.

"Everything we'd always been told about retirement planning and investing seemed to be a lie, or at least it wasn't working out as we'd planned or hoped," Chuck told me. "It wasn't until we really started looking at the spending side of our finances that we began to feel like retirement was once again something within our reach. We realized that if we can simplify our lives, we can still retire very happily and on less money than we ever thought possible."    

Like a lot of Americans, the Great Recession hit Chuck and Doris' retirement and other savings pretty hard. During the recession, Americans lost more than $2 trillion in retirement savings — that's more than a third of their prerecession savings — not including the drop in the value of their homes.

Even though Chuck and Doris are still a few years away from retirement, they decided to start what I call the "retirement rightsizing" process. The idea is to begin reshaping your lifestyle — and particularly adjusting your spending — to more closely reflect the life you plan to live in retirement.  It's a sort of retirement test drive. It's a chance to see how you like the retirement lifestyle you have in mind and make any adjustments before you actually retire. Plus, scaling back now will allow you to sock away that much more in your retirement nest egg.

In their mid-40s, Chuck and Doris got busy "retirement rightsizing." They sold their 4,000 square foot home and moved nearby into a smaller place. They have one car and Chuck has started to work at home a couple of days each week, mirroring the part-time consulting schedule he hopes to continue in retirement. The local university provides countless free or inexpensive activities, including bargain greens fees at the campus' golf course.

"When we sold our house, we realized how much stuff we owned that we never used and didn't need," Doris told me. "We sold tons of stuff [the proceeds from which went into their retirement savings], and we don't miss any of it. … We now think long and hard before we buy anything … not because we can't afford it, but we ask ourselves if we really need it."

The important life lesson Chuck and Doris learned is that how much you spend is as important as how much you earn or have in savings when it comes to financial security and happiness.

Jeff Yeager is the author of The Ultimate Cheapskate's Road Map to True Riches and The Cheapskate Next Door. His website is www.UltimateCheapskate.com and you can friend him on Facebook at JeffYeagerUltimateCheapskate or follow him on Twitter.

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