So, I’m back to my game of Financing Retirement. The Money In half of the equation doesn’t start when we turn fifty or sixty.  The things we do all through our adult lives will set the stage for retirement planning. Our habits and practices can make sure we do (or don’t) have a retirement foundation. So…what happens when an impulse buyer marries a thrifty Scot? What if there’s a little of both in each of us?

Over the years in our home, we’ve made big decisions (homes, cars, vacations) together, of course.  But the little stuff… not so much. Each of us has a checking account on which he/she is the primary person. We’ve always had our individual paychecks “direct deposited” into our respective accounts, and we each allocated a certain (agreed on) amount to bill-paying for the household. The relatively small amount left to each of us was for our own discretionary spending – lunches, gifts, hobbies, and other fun stuff. We also each managed to save a little for future fun stuff.

But when it came to retirement saving, we didn’t do much specific planning until our kids were grown. Then, we found that our fairly conservative spending style had paid off.  What did we do, specifically? Nothing big, actually. Just a little bit of this, and a little bit of that.

• The first thing we did was review where we were at regular intervals. That included updating our wills, and keeping tabs on the extent of our debt (and things like changing interest rates on credit cards.)  If taxes or food prices changed, we adjusted how much each of us paid into bills to stay current on those things, rather than using credit cards.
• Contributed to 401k plans offered by our employers (or IRAs in the years we were self-employed). We put in the percentage that allowed the maximum matching contribution (free money) from our employers. Our 401k contributions reduced our taxable incomes a bit, and we had the option to pick different types of investments. The downside is that this is “pre-tax” money – we will pay taxes when we access it – but hopefully at a much lower tax rate than we would have pad on that money in our peak earning years!
• Paid extra into our mortgage whenever we could, and refinanced to lower interest rates when it made sense, allowing us to pay off more principal each month. This helped us build equity in our home. Unfortunately, we bought our first home late and moved quite a bit, so so we have never come close to paying off our mortgage. We are also (like everyone else) at the mercy of the real estate market when we sell this property to buy our retirement home (wherever that is!)
• Put a small amount into savings each month. The net amount here is paltry as life savings go, mostly because we dipped into it to pay for large purchases, vacations, and some emergencies. That kept our debt (and interest payments) down. The interest on credit cards is much higher than the interest on a savings account. 

So… no huge single thing, but some home equity, pre-tax savings, and a little in after tax savings. Add to that very little debt (a primary goal all along), social security, small pensions from years ago, and a few small investments made over the years, and we have the beginning of our retirement financing plan.

Social Security isn’t as certain as it was, and upcoming changes may affect our decisions on when to begin taking it. More on that will follow. And then, we can start to talk about the Money Out items, and how to get our arms around what those expenses will be!

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Photo credit:  board game: © linno – Fotolia.com