For those with high-paid jobs, contributing a few hundred to a pension fund each month barely touches the sides. For others, however, anything more than $50-$100 each month is simply not doable, meaning that compromise can seem like the only option once we finally reach retirement age.
But, there’s no reason that this needs to be the case. Your retirement is supposed to be the best time of your life, after all – a time when you’ve paid your dues and are finally able to enjoy the fruit of your labors. And, this should be possible regardless of how large your pension size.
After all, financial stability means something different for everyone, and even a trickling pension that doesn’t seem like it’ll be enough can serve you if you go about things in the right way. Get your head around this early enough, and you might even find that your later years at least feel richer than they would if you had surplus cash to waste. You simply need to make sure that you take the following steps to achieve it.
# 1 – Know what you’re working with
Perhaps the worst mistake that you can make with a smaller pension is to assume that you have more than you do. After all, it’s a leap going from having a reliable monthly income to having a set amount to last you the rest of your life, and that requires a fair amount of getting your head around where things stand, and what that means for you.
Specifically, you need to look at how much you have in the pot overall, and how much you can realistically allow yourself each month off the back of that. Once you sit down to work that much out, you should find that a few minor lifestyle adjustments could see you comfortably getting by on far less than you previously imagined.
However, that’s never going to be possible if you don’t first take this time to get your finances in order. So, sit down with your pension documents and a calculator, and get to work working out how much you’ll have, and how much you need to reduce spending to make that doable.
# 2 – Retire in stages
When you have a large pension, the leap from employment to retirement isn’t that great, with your pension income likely mimicking that of your earnings pretty well. By comparison, those of us with a smaller pension to look forward to have a much further financial gap to bridge, hence why it’s always beneficial to retire in stages.
The vast majority of employers will be more than happy to keep you on for either part-time hours or just one day a week or so. This is good news for them, as it saves replacing you altogether, but from your perspective, this step in the retirement direction can buy you a lot of the security that a larger pension would in those early days.
You’ll be able to lean into that security while you learn to adjust to your entirely new financial normal. That’s especially the case if you set your actual income aside for emergencies (or times when you get it wrong,) and instead spend this time learning what you can spend where once your retirement is official. Then, when the big day finally comes, you’ll already have a pretty good idea of how you can live, and live well, despite the pay cut.
# 3 – Get in the habit of saving
It’s also vital that you learn, early on, the importance of saving where you can. By this, we don’t mean that you should set money aside. After all, you’ve been doing precisely that to ensure your retirement in the first place! Rather, we’re talking about the need to save on your expenses themselves which, once you start looking into it, is much easier for retirees than you might imagine.
Everywhere from Walgreens or iHop offer senior discounts which, when used over time, can save you a huge amount of your overall pension fund that you’re then free to use elsewhere. And, that’s just the tip of the iceberg on what you can save. Tax breaks, too, can see married couples over the age of 65 enjoying deductions of up to $2,600, while savings on everything from transport to a range of insurance options can also knock the dollars down to size.
The main benefit of getting stuck into deductions like this isn’t only in the short-term (though it’s always nice to save yourself money,) but is actually a long-term plus point. In fact, if you make use of enough discount options over a long enough period, you might just find that you’re able to achieve an overall flow of income that’s not so different to the earnings you made when you were working. That means more comfort for longer, and a standard of living that you recognize, all on your so-called ‘small’ pension fund.
# 4 – Know when to say no
Regardless of your ongoing income or your savings potential, a comfortable retirement also depends on your ability to say no when the time comes. The simple fact is that you’re not rolling in unlimited cash anymore, and jumping headfirst into every vacation opportunity, shopping trip, or meal out is soon going to see your pension fund drying faster than the Sahara.
The thing to remember is that this isn’t unique to you because of your small pension. Even a large retirement pot has a limit, after all. But, it is a priority that you’re going to need to keep in mind a little more than someone who has excess cash to splash.
Of course, this should by no means prevent you from living a comfortable life regardless. Rather, learning to prioritize and get picky about what you actually say yes to is, in large part, the secret to ensuring the retirement of your dreams, no matter how much money you have behind you.