Published Tue, Sep 10 2019 2:20 PM EDTUpdated Wed, Sep 11
2019 10:08 AM EDT
Key
Points
·
Today’s retirees
stopped working at age 59, on average, according to a new survey.
·
Some of those
individuals were forced to retire either because of their health or job loss.
·
Here’s how to plan for
the possibility that you may not be able to work as long as you want.
Early retirement may sound like a dream.
However, if today’s retirees are any indication,
you may want to rethink how you plan financially.
A new survey
from NerdWallet finds that today’s retirees stopped working at 59, on average.
That is much lower than the traditional
retirement age, which many still consider to be 65. Because full Social
Security retirement benefits don’t kick in until as late as 67 for many, a
number of experts recommend pushing retirement off even later.
Some of those retirees — 36% — said they didn’t
have a choice as to when they retired. What’s more, 18% said they had to stop
working because of their health, and 9% said a job loss forced them into
retirement.
While you may think of retirement as far off in
the future, planning for the fact that you may be forced into early retirement
would have a dramatic impact on how you save.
Take a 25-year-old with pre-tax income of
$40,000 and $10,000 in savings who expects to live to 95.
Assuming a 6% return, that 25-year-old needs
$483 in savings per month in order to retire at 67, according to NerdWallet’s
retirement calculator. Changing that retirement date to 59 — eight years
earlier — would bump their savings target up to $883 per month.to save a month to retire with a million
The savings hurdles are even higher for a
35-year-old because they have less time until retirement.
Take an individual who is making $80,000 in
pre-tax income with $87,000 in savings who also expects to live to 95.
To retire at 67, they would need $1,267 a month
in savings, assuming a 6% return, according to NerdWallet’s retirement
calculator. That gets kicked up to $2,767 a month in savings if they instead
retire at 59.
The key takeaway: Even if you don’t plan to
retire early, you should save like you may have to.
If you’re in your 20s, putting more money away
now means that you will have to save less over time, noted Arielle O’Shea,
investing and retirement specialist at NerdWallet.
Even if the idea of retirement itself doesn’t
motivate you, the flexibility that having those funds will give you should.
“You’re giving yourself options,” O’Shea said,
including the ability to pursue a different career if you choose to.
If you’re in your 30s or 40s, do not get
discouraged, O’Shea said.
Take advantage of any changes to your expenses,
like children switching from private day care to public school, to invest that
extra money toward your retirement.
Bottom line: “Save as much as you can,” O’Shea
said.
One thing all retirement savers should do:
Calculate how much you need to save for based on multiple retirement ages. Non-retired
survey respondents most commonly said they expect to retire between 60 and 66.
By moving your target retirement date higher and
lower, you can see how that changes your retirement savings targets, O’Shea
said.
“Americans aren’t saving enough for retirement,
and we’re hoping to open their eyes about that and do whatever they can to
boost those numbers,” O’Shea said.
NerdWallet’s online survey was conducted by the
Harris Poll in July. It included 2,027 individuals ages 18 and up, 1,605 of
whom are not currently retired.
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