2/29/2012 2:37 PM ET|
Retire without quitting your job
You don't even need to stick it out with your current job. Any job that allows you to pay your bills (and that includes health insurance, at least until age 65 when Medicare kicks in) will do.
If you think this sounds too good to be true -- well, there are some caveats. T. Rowe Price assumes your investments will earn, on average, 7% annually before retirement and 6% thereafter. Though those are reasonable long-term assumptions, a bear market in the short run might make it prudent for you to continue saving 5% to 10% into your 60s.
You'll also want to save if your company offers a match. That, after all, is free money.
What you shouldn't do is dismiss this approach on the grounds that Social Security is about to collapse and that you need to lock in your benefits as early as possible. Despite what you may have heard, Social Security isn't going to disappear. Even if Congress doesn't make needed changes by 2036, when the system's reserves are scheduled to be depleted, Social Security will continue to take in enough revenue to pay 75% of the benefits promised to current and future retirees.
If Congress does reform the system, high earners may not get as much out as currently projected. By the time you approach age 60, though, you should be able to estimate your future benefits with reasonable confidence, as lawmakers are much more likely to impose changes on those far from retirement rather than those in the last stretch.
I did have one other concern about this approach: What if you suspend your retirement contributions and then get tossed out of the workplace earlier than you'd planned by disability or disease?
In that case, you may be glad you traveled and visited those grandkids while you could, Fahlund said, even though your gambit didn't pay off quite the way you'd hoped.
She likened the situation to people who are diagnosed with a terminal illness: Most don't fret about the fact that they could have saved more money.
"When I talk to people, they all seem to agree: 'Thank God we took those trips,'" Fahlund said. "When I talk to people in their 60s, I can't think of anyone who wouldn't say that."
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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