11 Ways to Prep for "Guerrilla Retirement"

By Kentin Waits on 5 May 2010 6 comments

The other day, while browsing one of my favorite news sites, I came across a lengthy article on retirement planning. The strange thing about the piece was its sole focus on 401(k) plans as the path to retirement security. Even with the economic debacle that we are all still living through and the unclear future of Wall Street regulation in this country, this major news source still pointed to 401(k) plans as the panacea for the complex challenges of retirement. Surely it’s a more complicated discussion than “max out your contribution and review your funds twice a year.” In fact, with all the obstacles facing today’s average worker, I think the entire topic needs to be relabeled “how to prepare for guerrilla retirement.”

What exactly is guerrilla retirement? Well, it’s an approach to retirement that’s more aggressive, more conscious, and less conventional. Ideally, the preparation starts earlier and includes a lot more than optimizing the paltry choice of investment options your company’s 401(k) plan wants to spoon-feed you. Here are 11 key points to consider in prepping for your own guerrilla retirement.

1. Optimize your 401(k)

Contributing at least enough to get the company match and choosing your investments wisely is still a critical piece of the puzzle. Understand the fund choices you have available and the risk level each represents. Monitor and guard your balance well, transfer it from job to job, and avoid loans against it.

2. Don’t fund your refund

Getting a big tax refund at the end of the year might feel like a victory, but often it means a failure in financial planning. If your regular withholding tax generates a refund consistently each year, your employer is deducting too much from your paycheck. Fill out a new W-4 and make the necessary adjustments. That slow trickle of extra money you’re lending the government every pay period could be filling your own retirement coffers.

3. Save, save…then save some more

The old rule of thumb for a secure retirement is to save 10% of your pretax earnings, and that’s a good place to start. For guerrilla retirement though, add another 15-20% in after-tax money and invest it wisely. A Roth IRA is an ideal choice for investing after-tax and not having to worry about tax liability on earnings later (provided that you don’t withdraw prior to age 59 ½).

4. Buy a home early

If at all financially feasible, buy a home and work to pay down your mortgage quickly. The amount you save in interest will astound you and can be put toward other investments. However modest it may be, having a home that’s paid for is a real advantage in retirement. It keeps one of life’s largest expenses constant and can be a valuable asset if you ever need to draw from it.

5. Avoid all consumer debt that can’t be paid off in 30 days

Like government deficits threaten national economies, consumer debt jeopardizes household economies. Interest on unsecured consumer debt is arguably the heftiest tax levied in this nation; it’s an undeclared tax on our consumer way of life, vulnerability to advertising and our financial illiteracy. The mental energy, financial juggling, interest and service fees aren’t worth the convenience that plastic offers. Avoid it like the plague.

6. Review those Social Security statements

I love the fact that we get these little curiosities each year, though my faith in the promise is waning. Still, take a look at the earnings for each of your employed years, look for mistakes and have them corrected. This information is the basis for your future benefit, and its accuracy is important.

7. Have a retirement ‘mini-job’

Retirement doesn’t have to be an all-or-nothing proposition. As you plan to leave your primary work behind, explore new ways to add to your income. Consider banking new skills like you bank money and then leverage those new skills in retirement. A desk jockey might become part-time carpenter or a teacher starts freelance writing. Follow a new dream.

8. Embrace simplicity

Part of the struggle many face in retirement is downsizing from a lifestyle that perhaps should have never been “upsized.” Embrace the simpler pleasures of life and look for economies that can be borne from more time. Maybe your family can go from two cars to one, or from one car to two bikes.

9. Stay fit

A good retirement encompasses body, mind and money. Keep yourself engaged in hobbies, interests and activities outside of your 9-to-5. A good diet, healthy lifestyle and positive attitude are all essential defenses as you launch into your retirement years.

10. Nurture community

As the old African proverb teaches us, “it takes a village to raise a child.” The same could be said for retirement: It takes a village to retire gracefully. Cultivate your friendships and your community and understand their essential role in providing stability, joy and resources as you age. Look around you. Is there a retiree you could be of service to now?

11. Keep a garden

It may sound like an afterthought, but gardening can reinforce several different aspects of a vital retired life. Nurturing a good garden helps keep us fit (which supports point #9). It keeps us in the sunshine, gives us a chance to build community (point #10) and be out in the spectacle of nature. Growing a few basic food crops can put us in control of our diet and help ease the food budget a bit too.

Some of these approaches may not be feasible for everyone everywhere, but as we adjust to the aftershocks of the recession and wonder what may be on the global economic horizon, the topic of retirement begs more examination. The days of working until 65 and then quite abruptly becoming part of the leisure set may not be realistic for the new generation of retirees. Maybe it was never the best approach to begin with. Social Security may only be a specter by the time I’m ready to retire, and who knows how the health care system will look in 15 years? I don’t expect to have the same retirement my parents had. It will probably be later, a bit more modest and much more…guerrilla.

This is a guest post by Kentin Waits. Kentin has worked in web marketing for 13 years and run his own eBay business for 10. In 2009 he published two articles for Backwoods Home Magazine and is currently working on a page-a-day desk calendar on the topic of financial empowerment.

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Guest's picture

Excellent post.

This is a big picture view that takes into account flexibility and diversification. Think about it: we wouldn't invest our equity portfolio all in one stock, would we? No - most people have such equity investments in diversified mutual funds, through their 401(k) or other plan.

By the same token, in looking at our OVERALL retirement portfolio - and taking a very holistic view of what is contained in this "portfolio" - it makes sense to look at retirement planning through multiple vantage points. This not only means through different asset classes, but also different life categories -health, wealth, relationships - I like to call it the HWR framework. Its all interconnected.

Guest's picture

Excellent point -- I like your HWR framework; security/wealth is so much more than money.

Guest's picture

I really liked this post. Basically, guerrilla retirement = frugal living. I like this take on frugality... People often think of living frugally as some sort of deprevation. When you think of frugality in the context of a comfortable (and maybe even early) retirement, it's much easier to stomach.


Guest's picture
Barbara Bryn Klare

Well said! We all have to filter retirement advice through what we know to be now true: the old "401K + match" rule is tired, old news. The New Retirement: each person is his/her own best financial advisor, and the rules are changing all the time, just the like the job market, the economy and the world market. Stay nimble, be informed and question everything. It's your retirement, not anyone else's.

Guest's picture

Practicality is a thing that is instituted in having funds for retirement. This post shows relative preparations that assures our future demands. Providing security as we get old and incapable for financing our own needs is such a wise and productive decision.

Guest's picture

In addition to a 401(k), there are some other investment options to prep for retirement. Check out this article on creating your own best retirement plan: http://bit.ly/aB6vyC