My parents enjoyed a comfortable retirement for 25+ years by living by 5 money rules throughout their lives (2024)

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• My parents retired in their early 60s and enjoyed a comfortable retirement for more than 25 years.
• They had multiple streams of retirement income, including a rental property and investment accounts.
• They never carried high-interest debt during their working years, and they invested in long-term care insurance to cover late-in-life expenses.

My parents both retired in their early 60s with enough money and sources of recurring income to live comfortably for 25+ years (my dad died eight years ago, but my mom is still alive at 86).

In their retirement years, they drove to Vermont to go fishing on Lake Champlain almost every weekend in the summer, and they spent their winters in Florida. In each place, they had a modest home and a small boat, in addition to their primary home and investment property in the Berkshires in Western Massachusetts.

They were not wealthy by any means — my dad grew up on a small farm and managed an auto parts store; my mom, the daughter of Polish immigrants who worked in the textile mills in my hometown, was a secretary. They never lived extravagantly, but they seemed to know instinctively when to spend money on things that had value, and when to save.

While my own financial circ*mstances are very different from my parents', their example has informed how I handle money and plan for my own retirement. Here's what I've learned.

Debt is (usually) not your friend

My parents paid every bill they received when they received it, never carried a credit card balance, and only made large purchases if they could pay for them in cash.

The big exception was 50+ years ago when they bought the two-family home they were renting, as well as the two-family house next door. Back then, my dad was able to talk his way into 100% financing with a local banker whose car he worked on, and who trusted him. He paid off that loan 27 years later.

He also refused to put himself (or me) in debt to pay for college, so in addition to his day job, he plowed snow at night to earn extra money for my tuition. The biggest gift my parents gave me was a debt-free college education. They did, however, insist that I take out a small loan in my senior year so that I could establish a good credit rating.

Make saving a consistent habit, no matter how much you make

My parents saved for themselves, for me, and then for their grandchildren. When she was still working, my mother started passbook savings accounts for both of my children, faithfully depositing $10 or $15 in each account whenever she got paid. When each of those accounts reached $3,000, she closed them and turned the money over to me and my husband and we invested it for our kids. We thought it would be a good idea to buy them some Apple stock, and that turned out to be a pretty good decision. They now each have stock portfolios that were initially funded by their very diligent "Babci" and, hopefully, her example will inform their own financial decisions in the future.

Contribute to your employer's retirement account, or start an IRA if you're self-employed

My parents earned modest salaries, but they were both very committed to contributing to their respective employers' retirement plans. When money's tight, it's easy to convince yourself that you can't possibly do without every cent in your paycheck. But even a little bit, particularly if your employer matches those contributions, will add up over the years.

If you're self-employed, as I am, start your own retirement account and contribute to it faithfully. The distributions will ultimately be another source of income you can rely upon in your retirement years.

Buy long-term insurance

And do it now, when you're young and healthy. Right now, seriously. The younger you are, the cheaper it is, and unless you're independently wealthy, chances are you're going to need it.

While chronic health issues prevented my father from getting long-term care (LTC) insurance, my mother bought a policy when she was 64 (better late than never!). She recently moved into an assisted living facility, and is now using her benefits.

The rent at her new place is approximately equivalent to a modest studio apartment in a good neighborhood in Brooklyn, which is to say that without LTC insurance, it would not be affordable. The national median cost of assisted living is $4,000 a month. and the average length of stay is two and a half to three years. Medicare does not pay for this, so you're looking at $144,000 or potentially much more if you need memory care assistance.

I know, I know. This is not something you want to think about now, but do it anyway. My husband and I both have LTC insurance and I feel confident that if we require assisted living in the coming decades, we won't be burdening our kids or spending down our assets to pay for it.

Invest in a recurring source of income

Now that I handle my mom's finances, I understand that retirement income comes from a variety of sources. Most of us will not be able to retire on Social Security benefits, so it's important to have other sources of recurring income.

My parents never had a big stock portfolio, but they held onto the two houses they bought for $15,000 in 1968, and they continued to live in the bottom half of one of them for most of their married life. Managing property can sometimes be a headache and it's not for everyone. But those houses, which have been mortgage-free for many years, provide my mother with an important source of recurring income. And I know that if she outlives her LTC benefits, the sale of those assets or a home equity loan will yield enough cash to keep her comfortable.