Planning to retire later in life? What you need to know

When will you retire?

It is a question that most of us begin to think about by the time we are 50 years old.  Having a marker of when you expect to retire is an essential piece of information that you need in order to plan for your retirement income needs.

When we first discuss the topic with people we get a wide variety of answers – from the lucky 55-year-old retirement to the 75-year-old retirement.  We also get those who have no desire to ever retire – they hope to die with their boots on.

The one group of individuals that I would like to discuss today of those in their 50’s who believe they will work well into their 70s.  It’s hard for most 50-year-olds to understand for majority of people the challenges and difficulties of working in your late 70s .

My Retirement CakeA recent Gallup poll indicated that only 40% of 65-year-olds were working full-time, part-time or seeking work in 2015.  This is a decline from 84% of 50-year-old men working full-time and 72% to 50-year-old women working full-time in the same Gallup poll.

We understand the excellent benefit to postponing retirement as long as possible to allow one to continue to earn income and have a longer time frame to build their retirement portfolio through saving.  A longer time horizon also allows them to leave the nest egg longer before drawing down on the portfolio for their own expenses.  It is also an excellent way to delay collecting Social Security benefits until age 70 which allows an individual to collect extra an 32% in benefits compared with someone claiming Social Security of the normal retirement age of 66.

However two new surveys pointed out that although this is a good idea – as is often the case with life – it doesn’t work out the way they had planned for many people.  The first survey by the Employee Benefit Research Institute found that 50% of retirees in its 2014 survey stop working earlier than anticipated.  It cited the three main reasons for an earlier retirement then the workers had hoped.  The primary reason was due to health problems or disability (60%), followed by changes at the company resulting in early retirement (27%) and forced retirement to care for family member (22%).

The other survey by New York Life insurance company found that 51% of retirees wished they had retired sooner. The survey found that for most they would have liked to retire five years earlier to take advantage of an active retirement while they were healthy and able.

These two surveys taken together highlight that people should plan to be able to retire in their mid 60’s if at all possible.  The key issue being planning for that possibility.  If the person’s personal circumstances allow them to continue to work through this time period all the better.  I often state that the happiest working people seem to be those who are working as an “option” rather than a requirement.

In order for most people to realize the possibility of an early retirement, they will need to plan early and save consistently  for retirement as they work.  That way, if their retirement is earlier than they hoped they will have enough savings in their retirement accounts even if the targeted income stream in the first year retirement is slightly less than was hoped.  We will chalk this one up to its better safe than sorry.

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About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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