Can You Guarantee You Have Enough Money to Retire?

Tuesday, May 22, 2007

When we retired, we had a tax issue hanging over our heads. I worked through the numbers and set aside mental reserves. But we weren't sure. Who knows what the tax people might do? I wanted a guarantee that our reserves were enough.

We retire with what we think we need, based on how we envision our retired lives. And then we want a guarantee we got it right. We want guarantees on non-financial matters, too. If I exercise and take my vitamins daily, I'll stay healthy. If I take malaria pills while traveling in Cambodia, I'll avoid the disease. If I stimulate my mind doing crossword puzzles, I'll stay sharp. All we want in retirement is to be okay; to live our lives as planned; to have a guarantee.

Unfortunately, I can't give you guarantees. But here are a few rules to set your mind at ease…

First, be realistic in your retirement plan. Several years ago friends decided to spend their two-week vacation with us in France. They wanted to try out our low-cost lifestyle, to see if our way of life would work for them. Rather than their usual $200-plus a night rooms, they stayed in hotel rooms that cost $40 or $50. Rather than trying the best restaurants in town, they ate with us in local restaurants, with a simple picnic now and again. We drank the local wines in each village, not the garbage but decent. Rather quickly these friends realized that our low-cost lifestyle created too much stress and discomfort for them. They stuck with us, as scheduled, for the two weeks. But they finally decided that, for them, they needed more money. Fair enough. They kept on working, to make sure they'd get the retirement they want. They were realistic, and that's the point.

Make sure you figure how much money you'll need, realistically. And make sure you have the investments to throw off that money.

Second, roll with the punches. Problems will come up; you'll deal with them.

In 1992, Money magazine did a follow-up on our retirement. We had been on their cover when our retirement book came out in 1988, and Money wanted to see how we'd made out. One question: had we changed anything? Yes, we'd changed two things. First, interest rates had fallen so much that we had to switch from one-year CDs to a more balanced investment portfolio, with stocks and bonds. Second, Argentina had overvalued the peso, making that country one of the world's most expensive. We were living in Argentina at the time. We decided to move back to the U.S. for a while.

The Money interviewer seemed stunned. "Our readers could never do that." Yet these changes had seemed fairly simple and straightforward to us. We had wondered about changing our investments--we suspected we'd been too conservative--and we were getting bored with Argentina.

So, we gradually altered our investment portfolio. And we moved.

Simple. Fun. Certainly nothing to panic about. We later moved several more times: to Chapala, Mexico; Paris; Las Vegas; Chiang Mai, Thailand; and back to Buenos Aires. We even built a modest house in a rural area outside of Buenos Aires, something we thought we'd never do.

Finally, the third rule and the best news of all: look at your odds. We've received literally hundreds of letters and e-mails from early retirees over the past 25 years. We've read the retirement boards on the Internet, talked with family and friends, seen retirement plans of the rich and poor. In all that time, in nearly every case, these early retirements worked out well. The money was there, the problems surmountable.

Paul Terhorst
For International Living

P.S. You can read my full article on early retirement in the May issue of International Living. If you've yet to try the print issue of IL on for size, now is the best time. Join today and you get 42% off the regular price--that's only $27.95 for a one-year subscription. You get instant online access to every article mentioned above…a glossy issue in the mail every month…and much, much more. For full details, click here.

Editor's note: Paul and Vicki Terhorst retired young (they were 35-years-old) and have traveled the world ever since. You, too, can retire young. All you need to do is make a decision to make the change. Every week, you'll hear from Paul, who'll pass on his hard-earned tips on life in retirement.