How to decide if you should delay retirement
Sticking with your plan isn't necessarily the smartest move. Working a little longer could reduce financial stress and get you closer to your long-term goals.
I have a buddy who was planning to run a marathon this summer.
He put in a lot of groundwork to build toward it. The training required sacrifice and dedication. Then he hurt his back and had to take it easy for a few months.
He's better now, but he made a really tough decision: He's delaying his marathon attempt for a year, rather than invite failure, injury and frustration. Between now and next summer, he's revamping his workouts and routine so he'll be able to run.
This makes me think of retirement planning and how people are delaying retirement. In fact, 34% of Americans are planning to put off retirement for a few years, according to a recent Deloitte study. Much like my buddy, people are deciding that a little more work may be just the ticket for success.
Do you have a date -- or at least year -- you're planning to retire? Do you wonder whether you can pull it off or if you'll need to delay? Take some lessons from my friend's marathon story:
Delaying isn't failing. Rather, you're putting yourself in a better position by applying lessons learned. My friend is changing his nutrition and workout routine; you might consider changing your contribution level, investments and how frequently you rebalance your account to maximize the time between today and your new retirement date.
You can't change what you can't change. My friend got injured, and that set him back in his training. Similarly, a market dip can set someone back in their retirement saving. Both cases call for a reassessment of your strategy, but dwelling on the setback isn't helpful.
Sometimes it's the journey -- not the goal -- that's the fun part. My pal's setback helped him to remember that he loves running -- a fact he'd forgotten when he was so focused on training. Likewise, you may enjoy working and be happier working a few more years. Healthier, too. A recent French study showed that people who delay retirement have less risk of developing Alzheimer's disease or other types of dementia.
So how do you decide whether it's appropriate for you to delay your retirement? Do an audit of your financial situation:
- Decide what you'd like to do during retirement. Do you plan to travel or stay close to home? Do you anticipate relocating? Then estimate your monthly retirement budget. A general rule of thumb you can use is to plan on needing 70 percent of your pre-retirement income to maintain your current lifestyle. Depending on what you what to do in retirement, you may want to plan for more or less to better fit your goals.
- Use an online retirement calculator to help you determine how much you need to save, given your investment strategy, to fit your monthly budget.
- After crunching the numbers, if something doesn't add up, you'll have to make adjustments. You may need to change your current spending habits so you can afford to contribute more money to your 401(k)and other retirement accounts, reduce your expectations for retirement or delay retirement by planning to work longer.
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VIDEO ON MSN MONEY
I'm with Vudu13 and catdaddy1gg, I love my job but I don't want to do it until I die. Vudu is right on all the points why we are told to keep working. Death is not a fun way to retire or so it seems.
I've thought about early vs 'on-time' retirement. I have a couple of years in mind for earliest and early and then barely early. That clearly states where I am aiming. I have a few requirements of myself before considering retirement - sort of milestones to reach in addition to contributing regularly increased amounts toward retirement...if not accomplished...move to the next nearest year. Funny how time seems to fade away faster and faster, so I see it as an ever-increasing-in-value commodity - and I'm very sure that I'll appreciate the gift of extra years of bliss that I'm working so hard to earn.
Before retiring early, I'll be certain I have a long record of living on what I believe will be my income per year. Several years of living with a paid-off mortgage will go a long way to helping me meet that goal and will also enable greater savings to help manage those early years. I've accomplished the mortgage portion and have begun extra savings - minimizing the risk of tapping a 401k or IRA and allowing it to grow just a little bit more sans withdrawals. I'll also need to research and use care to account for medical insurance costs (there's a moving target!). No company pension, no company medical for life - does make the goal daunting, but knowing that makes it easier to plan. Still aiming for the earliest date - I don't give in easily and would never want to disappoint my senior self. Might be disheartening for the kids as this plan is not designed to leave behind an obscene inheritance. It just needs to be the right amount and I can do that.
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