5 Types of Retirees That Are Richer Than They Think, According to Kevin Lum
Written by
Gabriel Vito
Edited by
Zuri Anderson
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Saving for retirement is not a one-size-fits-all approach. Certified financial planner (CFP) Kevin Lum said some people are better off than they think, but fear still gets the best of them when they see headlines like “$2M Retirement Savings Is ‘Chump Change.'”
In a recent video, Lum said he has observed five different traits retirees share that make them better off than they realize. Here’s a breakdown of the traits, according to Lum.
They Spend Modestly
Lum calls this retiree “Modest Spending Molly,” someone who enjoys life “without upgrading everything.” He said, “Real wealth isn’t about how much you have. It’s about how much you need.”
The financial planner noted people with millions can still feel stressed if their lifestyle is expensive or they have less margin. He argues that you can live on less than what you thought was possible when you build margin into your life.
They’re Debt-Free
Lum describes “Debt-Free Donald” as someone who “doesn’t owe anyone anything. No mortgage, no car payments, no monthly obligations quietly draining his cash flow.”
Without debt, required income can be “shockingly low.” This way, Social Security and modest savings can cover essential expenses. Lower fixed costs create flexibility that even large portfolios alone can’t guarantee.
They Have Guaranteed Income
Lum introduces “Guaranteed Income Gary,” whose essential expenses are covered by Social Security, a pension or an annuity. When core costs are met by reliable income, retirees may be “much better off than someone with millions of dollars in a tax-deferred IRA.”
Guaranteed income “shows up no matter what the markets are doing,” which reduces risk and allows investments more time to grow.
Their Healthcare Is Covered
Healthcare is one of retirement’s biggest unknowns. Lum said, “Outside of taxes, health care is one of the biggest expenses that you’re going to face in retirement.”
Retirees with reliable coverage through pensions, Veterans’ Affairs benefits or long-term care insurance remove one of retirement’s biggest risks. That security can prevent fear-based decisions, such as oversaving or delaying retirement unnecessarily.
They Have a Flexible Spending Plan
Lum’s final example, “Flexible Fran,” understands which expenses are fixed and which are discretionary, which allows her to adjust when needed. Her flexibility in her spending plan “often will allow her to spend more money over her retirement” because she can adapt rather than follow strict rules.
Lum cites the popular 4% retirement rule as an example of a rigid withdrawal strategy that is often difficult to follow as expenses fluctuate. Alternatively, he explains that a dynamic plan helps retirees preserve assets in down markets while spending more in stronger years.
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