The Wealthy Retiree Part 2 – Living Below Your Means in Retirement
Quaero awoke early Tuesday morning. It was perhaps the first time in 20 years that he felt a sense of exhilaration at the thought of beginning his work day. Today was the first day in a series of lessons from the wealthy retiree, Will Pecunious, a resident of the senior community where Quaero worked. Will had offered to teach Quaero the secret of his retirement success in exchange for a sandwich each week. It seemed like a good deal to Quaero.
The hour had finally struck three and with much anticipation, Quaero arrived at Will’s apartment and knocked on the door clutching the D’Angelo’s roast beef and cheese sandwich. There was no answer. He knocked again but this time he could hear rustling behind the door and the turning of the deadbolt. The door swung open and the old man standing behind it had an infectious smile on his face, “You made it!” he greeted Quaero with a firm handshake. “I was getting worried you would back out of our deal,” he said with a wink.
Quaero thought to himself, not on your life and handed Will the bag, “Hi Will. Here’s your sandwich, roast beef and cheese, just like you asked. Will’s eyes grew as big as saucers as he snatched the brown paper bag from his hand, opened the top and stuck his nose in to take a long whiff. “Ahhh, I’ve missed that smell.”
“Are you ready for your first lesson?”
“You bet!” Quaero responded excitedly. “What did you mean yesterday when you said, ‘It’s not what comes in?’
“Lesson number one is a simple one, my boy,” Will replied as he laid out a placemat, ceramic plate, linen napkin, and opened his sandwich. Quaero chuckled to himself noticing that Will seemed to be preparing for a five course meal. “It’s all about what you spend, not what you make! Whether you’re retired on a fixed income or have a young family and are just starting out in life, you can build and maintain wealth by controlling what you spend.” Will finished as he took a giant bite into his sandwich.
“Quaero, I’ve lived a long time and have watched a lot of people make both good and bad decisions with their money. Our neighbors, John and Betty, who retired the same time as my wife and I, should have been able to live comfortably on $150,000 a year but spent themselves flat broke. They were always talking about how they deserved this trip to Europe or that expensive car. It wound up costing them their financial security and freedom. Ultimately, John had to return to work at the age of 78 earning $12 an hour to make ends meet.”
“On the other hand, my best friend, Rick and his wife retired on $40,000 a year and continue to grow their assets and live a very comfortable lifestyle by simply living below their means. They are frugal and very smart with their money. They travel to Europe, like John and Betty used to, but they put together a large group so they get to go for free. Using their time, creativity, and a little forethought, they have managed to live the lifestyle of someone bringing in three times the income and don’t lose a wink of sleep over their finances. The choice is yours, Quaero, what do you deserve?”
Quaero nodded in agreement. “I think I get it. So, whatever my income is in retirement, I need to live on less than it. Seems kind of obvious, don’t you think?”
Will paused, swallowed hard, and smiled, “Most of this stuff is. It’s common sense. But as the old saying goes, ‘Common sense ain’t common’. I have seen so many of my friends retire with a sense of entitlement. They feel that they worked so hard for so long, that now they are owed this or that. What you are owed is a worry free and comfortable retirement, not some beach house or sporty convertible.” Will was now getting loud, indignant.
“You’re right, Will. Maria and I have really always tried to live below our means. I think that’s why we are even contemplating retirement while most of our friends have resigned themselves to the fact that they will be working until the day they die.”
“Glad to hear it, you’re off to a good start and well ahead of most of your contemporaries. I believe that if you follow Rule #1 but ignore every other thing I am going to teach you, you will be financially secure.” Will replied with his mouth full as he chewed. “Your assignment tonight is to go home and talk it over with Maria. Make sure you are both on the same page and she understands the importance of living below your means, especially in retirement. Next Tuesday, come back at the same time for Lesson #2. We will be talking about exactly how much that number is. This will help you decide when you are going to be ready to retire. You see Quaero, when we first met I said when you retire is up to you. It depends on what kind of lifestyle you want to live. Next week, I can show you how to decide if you’ve secured sufficient savings and assets to meet that lifestyle.”
“That’s great, Will. I think I will like next week’s lesson”
“And I think I will enjoy the chicken parm sandwich you will be bringing me” Will replied as he polished off the last of the roast beef, licking his fingers.
“It’s a deal. See you Tuesday, Will. And thanks!”
“Have a great week” Will replied as Quaero headed out the door with a wave.
Next Issue: Lesson #2: “How much can I spend?”