70 is the New 65 When it Comes to RetirementSubmitted by Butera Wealth Management, LLC on July 6th, 2016
The majority of individuals in their late 40s and 50s, and some even younger, have their minds set on retiring early and spending the remainder of their lives relaxing with a book on the beach or tackling the fairways at the golf course. While that would be ideal, the dream of living your golden years sooner rather than later is becoming increasingly unrealistic for a number of reasons. Therefore, preparing for a later retirement is more important now than ever.
As health and pharmaceutical efforts continue to advance, one of the greatest factors influencing later retirement is longer life expectancy. People are living longer and healthier lives than ever before. The sooner you retire, the more money you will need in your nest egg, and the longer you live, the greater the risk of outliving your money. Pushing off retirement by even a few years can substantially decrease the odds that you will outlive your savings.
Working longer means you not only need less money in your nest egg, but at the same time, you build up more wealth to suit your income needs in retirement. Even one or two extra years on the job gives you more time to contribute to a 401(k) and IRA, allowing more time for your money to grow, and preventing you from tapping into the funds too early. That larger nest egg can provide a lifetime of higher withdrawals and increase the likelihood that your money will last through your retirement.
An even greater issue preventing workers from retiring on time, let alone retiring early, is the uncertain funding stream for Social Security. It is no secret that the trust fund established to fund the government retirement program is dwindling, and unfortunately, Congress has shown little inclination to rectify the issue.
Not to mention, financial experts expect the applied fix to cause a rise in the retirement age. If you are planning on retiring and receiving Social Security at age 62, you could be in for an unpleasant surprise.
Retiring at a later age can also save you money. One of the biggest expenses retirees face is health insurance. By postponing retirement, you could reduce your expenditures by thousands of dollars a year. When you stay with your employer, you can retain your employer-sponsored health insurance, reducing your out-of-pocket costs and giving you the opportunity to put more money aside for retirement.
The benefits of continuing to work beyond the expected retirement age far exceed just sponsored health insurance. Many employers also offer free life insurance, the opportunity to buy company stock at a discount, stock option benefits, and the chance to participate in a 401(k) plan.
Many employers are even offering financial incentives to older workers who agree to stay on the job, which can be a win-win for employer and employee alike. Employers can avoid the expense associated with hiring and training a replacement, and employees can sock away more money in their retirement plans.
Even for those who do retire early or on time, it is a good idea to make the transition by cutting back full-time hours and continuing to work a part-time job. More and more retirees are choosing to take up less demanding jobs not only to supplement their income, but also to stay active well into old age.
Keep in mind that increased longevity may provide you with decades of post-career leisure time. Staying on the job longer than you anticipated may not be a bad thing after all. In fact, it could give you additional peace of mind, more investment options, and years of financially secure retirement living.
Retirement should be a dream you look forward to, but the reality is it may come later than expected, and you have to be prepared. Now is the time to seek the right advice and guidance so that your financial future is a bright one, and Butera Wealth Management is here to help.