Retirement: Saving by Living Simply

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© 2013 Christy King

“When you’re in your 50s…you can try to save as much as you can, and try not to get accustomed to a lifestyle that you won’t be able to afford later on.”

- Alicia Munnell, director of the Center for Retirement Research at Boston College

This quote from Professor Munnell appeared in a New York Times article, For Retirees, a Million-Dollar Illusion, earlier this month. The gist of the article is that even a $1 million nest-egg for retirement isn’t much anymore, due to low bond yields and longer life spans. Further, most people haven’t saved anywhere near $1 million for retirement.

Those interviewed for the article suggest people invest in more stocks (vs bonds) and work until they are older than they had planned, both for the income and to max out Social Security payments.

Edmund N. Wolff, an economics professor at New York University, notes that Social Security plus the cash flow from a $1 million portfolio (totaling $71,000 a year) “isn’t likely to be enough for people who have grown accustomed to living on $150,000 or more a year.”

“To enjoy a long, comfortable retirement, save more today.”

- Suze Orman

The New York Times article is about 2500 words long and spans three pages, yet surprisingly, the only mention of living a simpler lifestyle is the Professor Munnell quote above.

While some people truly are living on the edge, struggling to feed their families, the article is apparently targeted to people who aren’t in that situation, but rather to people who are “accustomed to living on $150,000 or more a year.”

Those with retirement investments to worry about will almost always have plenty of ways they can downshift their lifestyles now, with no need to wait until they’re in their 50s.

In a time when monthly technology expenses alone (cable TV, internet access, data plans, etc.) can mount up to hundred dollars a month for a family and the average home size in the US is more than double the average home size in 1950 (despite fewer people living in each household), it’s hard to believe that such a long article would give so little attention to the simple solution of spending less.

The secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less.

 - Socrates

It’s true that most people don’t want to live in tiny houses and few are willing to give up their cars unless they live somewhere with excellent public transportation. It’s also true that there a lot of options between the extreme minimalist lifestyle and the high-consumption way so many people live.

As I mentioned above, the average size home in the US has more than doubled since 1950. Do we really need all that space?

I remember reading an article a few years ago that cited a study that found most people spend most of their time at home in a ridiculously small amount of square footage.

I can’t find the article now, but I remember thinking how true it was for us because the kids and pets were always following us around.

It’s a bit different with teenagers, who tend to want to spend more time away from their families, but they still don’t need a lot of space. One of my favorite books, A Pattern Language, points out that while each person needs a space of their own, a small area such as an alcove is enough.

“Your house is just a pile of stuff with a cover on it.”

- George Carlin

So what do we use all that space for? To store our stuff. And yet, even with average house sizes so much larger for fewer people, a National Association of Realtor’s survey found that even “most satisfied homeowners still said they would like more or larger closets and storage space.”

Somehow, people have gotten the idea that instead of having less stuff, we should just build more places to keep it:

“Bigger homes need more land and more building materials, which all cost more. They also cost more to heat or cool. But the fact is, we are not thriving in small homes, and as the years go by, they feel smaller and smaller as we try to cram more and more in. Technological advances are not going to stop, and we need to face this fact and start planning for it now.”

Ironically, this quote comes from a blog called the feng shui art of space clearing.

One of my interests is home design, and I’ve been shocked to find large homes (3,000 square feet plus) showcased in books for “empty nesters.” I really don’t see why my husband and I would need a much bigger house for the two of us in retirement than we had for raising three kids.

“The most important thing to note is that cutting your spending rate is much more powerful than increasing your income.”

Mr. Money Mustache

A family who downsizes from an average-size house to one just a few hundred square feet smaller will still have a lot more room per person than families in the 1950s did while saving a lot of money.

Not only are smaller homes less expensive to buy or rent, but they’re less expensive to keep up, furnish, heat and cool. Also, if you have less room, you’re not as tempted to buy stuff you don’t need – you know you won’t have anywhere to keep it.

Add to this the savings that come from living even slightly more simply and you’ll find you have a lot more money to invest.

What does all this have to do with retirement? Living simply means you’ll be able to retire sooner because you’ll have more money saved for retirement and you won’t need a big income to maintain the same lifestyle in retirement.

Please share your ideas for simplifying your life in preparation for retirement. Also, I’d love to hear from those who don’t live in the US – are most people in your country doing a good job of preparing for retirement?

5 thoughts on “Retirement: Saving by Living Simply

  1. Hi Christy, My “financial guy” was the one who advised us to move the 401K $ into an annuity. He was doing the same with his own $. I’m with you … I’d rather follow an expert’s advice rather than try to figure it out on my own. By the way, the annuity plan we have is with Guardian. Is it okay to put in a plug for our financial adviser? His name is Rich Howard, located in Walpole, Mass. Email address is rharwood@centinelfg.com

  2. Christy, What a terrific article, full of very good advice. I agree that most families use only a small portion of their living space. Most of us have one or two areas in our homes where we are most comfortable, and that’s where we spend most of our time. For me, it’s the bump-out sunspace portion of my living room (great on a sunny cold N.E. day!) or my small screen porch (wonderful for warmer months!). Also, would like to recommend that people think about annuities. I was fortunate to have moved most of my 401K $ into an annuity towards the end of my work life, just before the recession.

    1. Thank you. A good suggestion about annuities. I have to confess I’m not well educated on investment issues at all. I’m sure it’s terrible, but I have the 401(k) guy put my money in whatever the “age appropriate” bracket is and try not to pay too much attention. Otherwise it stresses me out!

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