As you’ve been planning and saving for retirement, you likely dream about retiring at a certain age. But what happens when you calculate your retirement income needs and the numbers come up short? Should you just plan on retiring later so you can maximize your working years and minimize how long you’ll need to live off your savings? While this may sound like the most logical option, it isn’t always the most effective strategy.
According to the 2021 EBRI Retirement Confidence Survey, there is a considerable gap between when a person expects to retire and when they actually retire. While 26% of respondents stated that they would like to retire at age 70 or older, only 6% followed through. (1) Most end up retiring earlier and often it’s not by choice. There’s always the chance you could lose your job or fall ill. Even if you want to work longer and save more, there’s no guarantee that you’ll be able to do that.
Let’s look specifically at a few reasons why retiring later is not a reliable strategy.
Unexpected Health Problems
Even if you are the picture of health today, you never know what will happen in 5, 10, or 20 years. As you age, your health can suffer. Working longer is not a guarantee, as 34% of retirees in 2021 were forced to retire early due to a health problem or disability.
Your Company Downsizes
It is incredibly disheartening if you are in the last few years of your career and your company downsizes, leaving you in the dust when you were counting on the income to provide for you in retirement. In fact, 25% of retirees were forced into early retirement due to changes at their company. At this stage of life, it’s challenging to find another job when interviewers know you will be retiring soon. While you can keep your skills sharp and take measures to prove your value to your current employer, you just never know what will happen to your company as the years go on.
Your Family Needs Your Help
Your loved ones are aging right along with you. Even if your health is excellent and your company still needs you, you may need to step back from the workforce earlier than planned to take care of a spouse or other family member. Your family comes first, so you don’t want to feel the pressure of working just to have enough in retirement if the unexpected occurs. It’s not fun to plan for contingencies like this one, but having a proactive mindset can provide you with peace of mind.
You Might Just Need a Change
When you’re in your 50s and still have years to go before you retire, it may seem simple enough to push out your retirement date from 65 to 70. But what happens when, at 63 or 64, you can’t imagine working for another six or seven years? If you were banking on working until 70, you might not have enough saved.
The younger you are when you retire, the more energy and health you’ll have to enjoy retirement. Many retirees regret spending their best retirement years grinding away at work. Sure, they had more money when they finally did retire, but they had less time to enjoy it.
Since you can’t predict the future, how should you plan?
Start With a Plan
At the end of the day, you may be able to retire when you want to, but wouldn’t you rather know now that you are doing everything you can to be successful and comfortable if you do need to retire earlier than planned? You’re never too young or old to start taking action and planning for your future, be it 5 or 20 years down the road.
At Center for Wealth Management, our mission is to help you make smart decisions about your money. Working with us, we can help you map out various retirement scenarios to see what your savings can handle and then review opportunities for maximizing your savings. To learn more, schedule a free introductory meeting online, call (248) 220-4321, or email me at email@example.com.
Justin Williamson is a senior partner and co-owner of Center for Wealth Management, an independent, fee-based wealth management company in Troy, Michigan. Justin has been serving clients in the financial services industry since 2001. He spends his days helping his clients achieve their financial goals and make the best decisions for their families so they can spend time on what they love and experience financial peace of mind. Justin is known for his dedication, integrity, personal touch, and ability to simplify complex issues. Justin specializes in serving engineers and other professionals who are close to retirement or recently retired and helping them maximize their benefits and create a retirement plan they can rely on. He is a seasoned public speaker and presents at numerous corporate events each year on retirement planning, Medicare, Social Security, and other financial topics. Justin has a bachelor’s degree in Business Administration majoring in Personal Financial Planning from Central Michigan University and is a CERTIFIED FINANCIAL PLANNER™ practitioner.
Outside of work, Justin enjoys spending time with his family. He lost his wife of 18 years, Heather, to brain cancer in 2020. He and his son, Carter, and twin daughters, Jaden and Kelsey, work to honor her and make her proud each day. Outside of work, you can usually find him coaching baseball, softball, and basketball, and spending time at their family cabin at Higgins Lake. Learn more about Justin by connecting with him on LinkedIn.