My plan runs short. Now what? (Lesson 6)

Three levers that each buy years, and together fix Ray and Angie’s plan.

Lesson 6 · Start here · about 5 minutes · 12 pictures

This is an educational walkthrough using a fictional family. It is not financial advice, and the right answers for you depend on facts a lesson cannot know.

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1.My plan runs short. Now what?

Title slide: My plan runs short. Now what? Three levers each buy years. Together they fix the plan. With portraits of Ray and Angie.

Ray and Angie’s money runs out when Ray is 82. Maybe your plan said something like that too. Today we fix theirs, and you will see how to fix yours. As always: this is an educational walkthrough using a fictional family. It isn’t financial advice.

2.Three levers

Three levers in numbered columns: 1, work longer, a little more time earning and saving; 2, spend less, a smaller gap to fill every year; 3, save more, more in the account with years left to grow.

There are three levers. Work a little longer. Spend a little less. Save a little more. That’s the list. We will pull each one for Ray and Angie and see what it does.

3.Work two more years

Lever 1: both work until 67, not 65. Three effects: two more years of saving, two fewer years of spending, and bigger Social Security checks for life.

Lever one. Ray and Angie work two more years, to 67 instead of 65. That does three things at once. Two more years of saving. Two fewer years of spending. And bigger Social Security checks for life.

4.The money lasts eleven years longer

Two bars on a timeline from 2040 to 2068. The plan as it stands ends in 2054, when Ray is 82. Working two more years ends in 2065, when Angie is 91: eleven more years.

Here is the result. Instead of running out when Ray is 82, the money lasts until Angie is 91. Eleven more years. It still falls a little short, but look how far one change moved it.

5.Spend $500 a month less

Lever 2: spend $500 a month less, $40,000 a year in retirement, down from $46,000. Examples: one fewer trip a year, a smaller car when the next one is due, eating out a bit less.

Lever two. Back to the original plan, and this time they spend five hundred dollars a month less in retirement. One fewer trip. A smaller car. Eating out a bit less.

6.The money lasts seven years longer

Two bars on a timeline. The plan as it stands ends in 2054, when Ray is 82. Spending $500 a month less ends in 2061, when Ray is 89: seven more years.

The money now lasts until Ray is 89. Seven more years.

7.Save $500 a month more

Lever 3: save $500 a month more into Ray’s account at work, starting now. Ray adds $6,000 a year more, his employer adds $3,000, so $9,000 a year more goes in for eleven years.

Lever three. Starting now, Ray puts five hundred dollars a month more into his retirement account at work. His employer matches part of it, so more goes in than he gives up.

8.The money lasts seven years longer

Two bars on a timeline. The plan as it stands ends in 2054, when Ray is 82. Saving $500 a month more ends in 2061, when Ray is 89: seven more years.

Again the money lasts until Ray is 89. Seven more years, from eleven years of saving a bit more.

9.All three together: the money lasts

Five bars on a timeline from 2040 to 2068. The plan as it stands: 2054. Work two more years: 2065. Spend $500 less: 2061. Save $500 more: 2061. All three together: lasts to the end of the plan.

None of the three finished the job alone. Now pull all three. Work two more years. Spend five hundred less. Save five hundred more. The money lasts the rest of their lives.

10.The new verdict

App screenshot: the saved scenarios list, beside two verdicts. All three together: Mostly on track, holding in 83 of 100 simulated futures. One more move, waiting longer for Social Security: On track, 92 of 100.

The verdict moves from runs short to mostly on track. That means the plan holds in about four out of five possible futures. To reach on track, there is one more move, about when to start Social Security. That is the first lesson of the next path.

11.No single big sacrifice

No single big sacrifice. Not a lottery win, not working until 75: three ordinary changes started early enough. They found out at 54, with eleven years to act.

Here is the lesson. Ray and Angie did not need to win the lottery or work until 75. They needed three ordinary changes, started early enough. Time is what made them work.

12.Pull one lever in your own plan

Three steps: open the Parkers’ Scenarios page and compare each one, open your own plan, and change one thing, such as retiring a year later or spending $100 less. Below, the link to Ray and Angie’s Scenarios page.

Your turn. Open the Scenarios page for Ray and Angie and look at each saved scenario next to their plan. Then open your own plan and pull one lever. Change your retirement age by one year, or your spending by a hundred dollars a month, and watch your answer move. That is the end of Start Here. You know what a plan is, where the money comes from, what it costs, how to build one, how to read it, and how to fix it. Next: the big decisions. This is education, not financial advice.

Try it

Ray and Angie’s plan opens with every number already filled in. Nothing you change there is saved, and it does not touch a plan of your own.

Open Ray and Angie’s Scenarios