When you picture your retirement, what do you see? If you’re like most people, you have a pretty solid vision in mind. And yet, for many retirees, surprises can and do happen. The best course of action, when planning for retirement, is to consider every angle and make a solid financial plan to cover all possible scenarios.
One of the biggest ways in which retirement plans fail concerns the time line for quitting work. In a study by the Employee Benefit Research Institute, 22 percent of workers said that they planned to wait until age 70 to retire. A later retirement is a common expectation these days, as many Americans play catch-up from years of financial downturn, attempt to pay down mountains of debt, or face the loss of their pension plans. In reality, however, only 9 percent of retirees actually worked until age 70. This means a quite a few people are retiring before they had originally planned.
If that sounds like good news, don’t rush off to pick out a boat or a new set of golf clubs just yet! While 26 percent of respondents who retired early told EBRI they did so because they could afford it, 61 percent said their early retirement was due to their health or a disability. Other reasons for an early retirement included being forced out by changes in the workplace, or having to care for a sick or elderly relative.
While you could certainly be one of the lucky ones who retire early for positive reasons, the odds are unfortunately stacked in the other direction. The main problem with retiring early is that you would be forced to begin taking distributions from your retirement account earlier than you had planned, resulting in a smaller monthly payment. You also run the risk of running out of money due to today’s greater life expectancy. And of course, if you’re one of the unlucky ones who retire early due to illness or disability, medical bills could really eat into your budget.
It’s great to be ambitious, and work a few more years to save more money for retirement. However, due to the possibility of numerous unplanned circumstances, you should consult with your financial advisor and have a back-up plan in place.
Source: http://www.ebri.org/pdf/surveys/rcs/2014/RCS14.FS-2.Expects.Final.pdf
