Copyrighted Material 2015

Introduction to Retired Broke-When you don't have enough saved for your retirement

We are a husband and wife writing team with extensive experience in government and the insurance industry. Early retirement was something always on our minds and we would occasionally review the numbers to see when we could make the decision to leave our jobs. We wanted to spend more time together pursuing our hobbies, traveling, and spending time with our grand kids.

Finally, we both retired early, about three years ago, in our fifties. Was it a mistake? Unexpected expenses and inflation experienced during our short retirement made a big dent in our nest egg. The 18% yearly increases to our health insurance premiums were especially damaging to our budget. This was unsustainable and we worried that we might run out of money before our time was up if this continued. Instead of going back to work full time we decided to find another way to cope with an underfunded retirement. This book contains steps we have researched -- many of which we have taken ourselves -- that can make a difference in your retirement.

There seem to be a great number of people in underfunded retirements. Maybe you are one of them. Perhaps you want to retire, but you're basically broke. You don't have to be completely without money to have an unsuccessful retirement. A partially funded retirement is still considered retired broke, because your savings probably won't last as long as your retirement years. One-third of folks aged fifty-five to sixty-four in 2010 had no savings to finance their retirement. Another third of retirees had only managed to save  a median figure of $100,000 for retirement. For those with no retirement accounts such as an IRA or 401K, then the median savings was only $40,000. This information comes from a June 2013 study by a nonprofit organization, The National Institute on Retirement Security, authored by Nari Rhee, PhD.

This is a crisis. Some of it can be blamed on individuals for not thinking ahead and starting to save their money sooner, but some is attributed to events beyond our control, such as inflation, unexpected medical bills, and suppressed wages.

Maybe you've been forced into early retirement because someone halfway across the globe will do your job cheaper or because a machine took your position. You may have some money saved, but you know it will not be enough to finance your retirement for the next twenty-five to thirty years. Maybe you can keep working a few more years at your present job, if you have one, or go back to work full time at another job. But who will hire you? Nobody wants to admit it, but age discrimination in the workplace exists.

Our theme here is to drastically cut expenses without sacrificing a comfortable living. Big dollar items, such as housing, transportation, and health car, are examined for potential savings that can make a big impact on your budget. We also discuss how to generate income if needed. We look into causal income from part-time work, starting your own small business for less than $500, ways to best invest what savings you may have, how to tap into your 401K/IRA's before age fifty-nine and a half without paying a 10 percent penalty, and other creative ways to raise income.

Some of the ideas we examine are extreme or drastic. Other ideas are perhaps easier to envision, such as simply renting out the spare bedroom(s) you have in your house or apartment. You make the choice depending the severity of your situation. You do not have to follow every step in the book; just pick out the ones you feel comfortable doing based on your situation.

This book will show you how to fix your retirement. The creative steps outlined may guide you toward peace of mind, and you may actually enjoy your golden years. At least you'll be able to keep a roof over your head and food in your pantry.

There are four ways to fix a broken retirement:

  • Increase your savings. If you have the time and means to earn cash, start socking away a large percentage of it. (However, you may have already missed that boat.)

  • Be aggressive with your investments. (Be careful, though. Take too many risks, and you might lose what little savings you do have.)

  • Decrease your expenses. If you are willing to make sacrifices, this is the easiest way to fix your retirement.

  • Find ways to earn additional income during retirement.

In this book, we concentrate on the last two ways. Reducing your overhead is the most effective and powerful way to fix your retirement, and we will spend a large percentage of time showing you how to do just that.

Substantially reducing your expenses is like having money in the bank. Let's examine how it works. Let's say you retired with no savings, like a third of retirees, but wish you had an annual income of $20,000 from a nest egg. It would require $500,000 in savings to generate that $20,000 income in the first year of retirement. That's taking 4 percent of your nest egg balance to pay expenses each year; the withdrawal rate most financial advisors recommend. Now, do the math backward. Instead of generating that amount, you find creative ways to reduce your budgeted expenses by $20,000, which has the same effect as having that half a million in the bank.

You could start small. Just remember that every $4,000 you cut from your budget is like having $100,000 in savings in the bank. You find the multiple you want. For example, maybe you already have $200,000 saved for your nest egg, but wish you had at least $400,000. If you don't have enough time to build toward that goal, then you simply cut $8,000 from your budget to achieve the same outcome.

Let's say you're really ambitious, and you want to have the same income you would receive from a $500,000 portfolio. We are going to show you how you can cut up to $20,000 from your budget in the following chapters. Impossible, you may say, but anything is possible if you are willing to do what it takes. If you are spending $60,000 a year, instead you will spend $40,000 to maintain your lifestyle. In the event that you are unable to cut that much from your budget, there is a section in the book that will show you how to close the gap by earning additional income during your retirement.

If you manage to cut enough from your budget, you might have enough excess funds from your retirement income, such as Social Security and pensions, to start a savings plan to add to your nest egg during your retirement, which will make for a more secure future.

This book is comprised of three parts:

First, assess your situation. Where are you in your life, at this moment? What do you have to work with? Where are you heading?

Second, find ways to reduce your overhead. Reduce your personal infrastructure cost, which will enable you to live on less, but still live comfortably.

Third, look at ways to bring money into your life. This could mean getting a part-time job, starting your own small part-time   business, or safely investing the nest egg you may have in order to live off the investment income.

We will give an example that shows how a typical couple followed the steps in this book to cut $20,000 from their annual budget. We also show in a second example how someone with only Social Security income survives, and enjoys retirement.

Let's get started .

Retired Broke How to Fix Your Retirement Randy Kirk and Jane Kirk


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