Recession-Proof Your Retirement Years

Late in 2008, I had dinner with my 87-year-old mother, and I asked her how she was doing, given the financial meltdown. "I'm doing just fine," she told me, "but I'm worried about what you kids will inherit, since the value of my retirement investments has dropped a lot." I told her that "we kids" don't worry about our inheritance and are much more interested in her well-being.

Then I delved a little deeper to find out more about why she's doing so well in her retirement. What can you learn from this? Plenty! Let's take a look:

• She has a lifetime pension from my father, who worked until age 65 as a professor at USC. That pension and her Social Security income just keep chugging along, in spite of the economic meltdown.
• She supplements her pension and Social Security benefits with interest and dividend income from her retirement investments. While the value of her stocks has dropped significantly, the dollar amount of her dividend income has dropped by a smaller, tolerable amount.
• She's paid off the mortgage on her house. The house is small by today's standards, but it meets her needs just fine.
• She keeps her living expenditures low and has no credit card debt. She drives a seven-year-old car, and most likely will continue driving it for another five to 10 years.
• She's in good health; she eats sparingly, but consumes lots of fruits and vegetables, and she gets good exercise by walking and gardening. She even grows some of her own food.
• She volunteers once a week in a nonprofit thrift store. She's doing the same tasks as if she were working for wages, so she could find a job that would offer a small paycheck if she needed it.
• She keeps in touch with friends and relatives, and sees family members at least once a week (all of her kids live nearby).

The financial meltdown really hasn't changed her life very much. She still has about the same income and expenses, and she continues to do what gives her joy in life. After talking with her, I realized that she and my late father made some smart choices that recession-proofed their retirement years, managing to successfully navigate through four downturns since my father retired almost 30 years ago in 1981.

It was that conversation with my mother that really inspired me to develop this systematic plan for living a long, prosperous life--and for surviving future downturns, which are inevitable if you'll be retired for 20 years or more.

10 Steps to Retirement Security

1. Take care of your health.
2. Protect against the risk of catastrophic conditions.
3. Consider working as long as you can at a job you enjoy.
4. Maximize Social Security income by delaying benefits.
5. Be prudent when withdrawing retirement savings.
6. Maximize income from traditional pension plans.
7. Manage your investment risk through asset allocation and invest for income.
8. Adjust living expenses to match your retirement income.
9. Develop a robust social portfolio.
10. Become a student of retirement and build a professional team.

The reasons for most of these steps should be obvious, but the ninth item--develop a robust social portfolio--needs a little explanation. Not only will this enhance your quality of life, but studies show it can actually improve your physical and mental well-being in your later years.

Successfully executing all of these steps will help you manage the magic formula that I introduced in my very first blog entry The Magic Formula for Retirement Security. There's a lot of detail in each one of these steps, and some are easier said than done. Join me as I explore these steps further in future blogs.

Having good strategies in place can help dispel the natural fear and anxiety that we all feel about the future. And it helps us focus on what's really important in our retirement years--reaching our full potential, taking care of unfinished business, spending time with friends and family, and passing along our legacy.

P.S. You can learn about the details of these ten steps in my book Recession-Proof Your Retirement Years: Simple Retirement Planning Strategies That Work Through Thick or Thin.