We have now officially been separated into two groups: those of us who have a bird-in-the-hand approach to retirement and those of us who are willing to wager against time. Here are five things to consider about these two distinct approaches to retirement planning. Both have upsides and downsides and present problems for both choices.
First: Working longer. There is absolutely no doubt that working longer will provide for the close-to-retirement aged worker the opportunity to replenish accounts that may have be impacted by the recent downturn (in 2008). Those added years will increase your Social Security payout. It will also allow you to play catch-up in your 401(k) plans and more importantly, get your budgets in line for a future of fixed income disbursements.
Second: Living longer. Statistics have shown that you will live longer. Yet this is as individual as your approach to retirement. In many instances, living longer presents a conundrum: how long and what kind of shape will you be in should you live for 30 years past the traditional age of retirement. If you are currently battling some health issues – as many who are approaching or are in their sixties, waiting a couple extra years for retirement is not going to increase your quality of life. Consider what retirement would be like if you tapped what you had accumulated in steps: drawing on one account, then several years later, then another.
Third: Legacy. What are your reasons for working longer? Is it to amass enough to keep you and your spouse out of the poorhouse or is it about leaving something for your kids or your favorite charity?Both are admirable considerations. But in the current thinking about retirement, these considerations should fall far below the consideration of creating enough wealth to support your surviving spouse.
Four: Budgeting. Save and invest as you might, retirement will be a time of less and ironically, a time of more. Without a budget in place, knowing what is coming in and what is going out, you will have no idea what your retirement will demand. Yes you’ll have more time and you want to be able to finance that time. But the same statistics that herald longevity also point to a prolonged period of not wanting to do as much. In a typical retirement, the first five years are spent exploring your freedoms while the remaining years cater to your health. Have you considered budgeting accordingly?
Five: Contributions. Most folks who are looking at the idea of working longer have not stepped up their retirement contributions to match their expectations. Wisely, you may be taking fewer risks. But that detracts somewhat from attaining the projected income you will need in retirement. You should be maxing out your 401(k) and looking for ways to invest in tax-advantaged plans outside of that pre-tax plan. Try living on far less in the years leading up to retirement if only to get a feel for life on a diminished income.
Simply suggesting you will work longer is not a plan. It is a penance for having not done what you needed to do when you had the opportunity. True, the markets have not been kind. But why do you entertain the idea that they will suddenly turn financially benevolent simply because you decided to wait a couple of years? Approach this “new chapter” as if it were the conclusion of a life well-lived. The loose ends get neatly tied up and you cherish each moment, without convincing yourself that you “must” enjoy working longer.
Retirement planning is not what it was and in the same respect, it is exactly what it was. The actuaries of the world have made it clear that you will live longer – a projection; not a fact. If your goals are too high, even working a few extra years may help financially. But will it actually be worth it?
Retirement is more epilogue than the next book of you.
Related posts:
- Retirement Planning: Getting to a Quarter of Million Dollars is Enough
- Retirement Planning: Who Takes the Surveys?
- Retirement: Comparing Apples to Oranges
- Taking the Guesswork out of Your Financial Plan
- Retirement Planning: The Camel’s Nose
Five Things to Consider about Retirement
We have now officially been separated into two groups: those of us who have a bird-in-the-hand approach to retirement and those of us who are willing to wager against time. Here are five things to consider about these two distinct approaches to retirement planning. Both have upsides and downsides and present problems for both choices.
Second: Living longer. Statistics have shown that you will live longer. Yet this is as individual as your approach to retirement. In many instances, living longer presents a conundrum: how long and what kind of shape will you be in should you live for 30 years past the traditional age of retirement. If you are currently battling some health issues – as many who are approaching or are in their sixties, waiting a couple extra years for retirement is not going to increase your quality of life. Consider what retirement would be like if you tapped what you had accumulated in steps: drawing on one account, then several years later, then another.
Third: Legacy. What are your reasons for working longer? Is it to amass enough to keep you and your spouse out of the poorhouse or is it about leaving something for your kids or your favorite charity?Both are admirable considerations. But in the current thinking about retirement, these considerations should fall far below the consideration of creating enough wealth to support your surviving spouse.
Four: Budgeting. Save and invest as you might, retirement will be a time of less and ironically, a time of more. Without a budget in place, knowing what is coming in and what is going out, you will have no idea what your retirement will demand. Yes you’ll have more time and you want to be able to finance that time. But the same statistics that herald longevity also point to a prolonged period of not wanting to do as much. In a typical retirement, the first five years are spent exploring your freedoms while the remaining years cater to your health. Have you considered budgeting accordingly?
Five: Contributions. Most folks who are looking at the idea of working longer have not stepped up their retirement contributions to match their expectations. Wisely, you may be taking fewer risks. But that detracts somewhat from attaining the projected income you will need in retirement. You should be maxing out your 401(k) and looking for ways to invest in tax-advantaged plans outside of that pre-tax plan. Try living on far less in the years leading up to retirement if only to get a feel for life on a diminished income.
Simply suggesting you will work longer is not a plan. It is a penance for having not done what you needed to do when you had the opportunity. True, the markets have not been kind. But why do you entertain the idea that they will suddenly turn financially benevolent simply because you decided to wait a couple of years? Approach this “new chapter” as if it were the conclusion of a life well-lived. The loose ends get neatly tied up and you cherish each moment, without convincing yourself that you “must” enjoy working longer.
Retirement planning is not what it was and in the same respect, it is exactly what it was. The actuaries of the world have made it clear that you will live longer – a projection; not a fact. If your goals are too high, even working a few extra years may help financially. But will it actually be worth it?
Retirement is more epilogue than the next book of you.
Related posts: