Lessons From a New Retiree

As I step off into retirement at the end of this week -- this is the last of these columns -- I thought it might be useful for readers, especially younger ones, if I took note of some of the strategies my wife and I have used, and lessons we have learned, over the years building our financial security.

Today's twenty- and thirtysomethings, more than any generation since before the Great Depression, seem destined to be left to their own devices when it comes to reaching their financial goals and securing a comfortable retirement. People this age have time -- time to save, invest and build assets. But they must have the discipline to do it. And that's no small matter because, for many lower-paid workers, the necessary savings will require economic sacrifices throughout their careers. It won't be easy, but it can be done.

My wife and I have been fortunate, in that we both have traditional pensions, which required no effort on our part and promise a lifetime stream of income. Hers, from the government, is even adjusted for inflation. Without them, our future well-being would be a lot less certain, but I'm confident we could still manage. That is because we have done as much as we could to accumulate other assets as well. Here's what we learned in the process:

Micro-Saving Works

All those books and articles you see about squeezing everyday expenses to generate savings are right. Almost everyone who has a job can manage to save a little every day. Simply substituting a Thermos of home-made coffee (tea is even cheaper) for the $3 latte could generate $500 a year, a good start on an individual retirement account.

But while the savings strategies work, they work best if you combine them with serious investing.

My wife began putting $2,000 a year into an IRA in the late 1970s, shortly after IRAs were invented, and I began when they became deductible for everybody. We both continued, using stock mutual funds, until the early 1990s, when it became clear that IRAs, by then no longer deductible for us, had ceased to make tax sense. Today our IRAs together total about $500,000, and that's not including my 401(k) and her Thrift Savings Account.

Note to parents: You can give your child a big leg up by starting a Roth IRA for her as soon as she has earned income. Teenagers today can make several thousand dollars over the summer, and under the law they can put away as much as they earn or $4,000, whichever is less. If you can afford to put that much into a good mutual fund for your child, it'll likely be real money 40 or 50 years from now. And while it's not deductible now, it's tax-free in retirement.

Marriage as an Economic Union

It's fashionable these days, in an era in which many marriages break up, for couples to keep their finances separate. Two checks for the rent. Splitting the dinner tab. His and hers bank and investment accounts.

My experience is that couples who act as a single economic unit do better. Ideally, young married couples should aim to live on one salary and invest the other. Not only does that seem to result in faster saving, it compels the couple to confer about their spending and investment. It's not his money, not her money -- it's our money.

If a husband and wife can't agree on money matters, their chances of staying married seem to me highly problematical. Operating separately may sweep disagreements under the rug, but they won't stay there. Marriage is a lifelong economic joint venture, and like a commercial merger, it won't last long if the partners think they're in different businesses.

My wife and I have been married 33 years. We have two joint bank accounts, but it's for convenience. An account with two people writing checks is hard to keep balanced. We can write checks on each other's accounts and sometimes do, but not often.

But we make our important money decisions jointly and, for whatever reason, the ones we have done best with are those on which we agreed easily. The record on decisions where one of us has talked the other into it -- or out of it -- has been more checkered.