Why 65 is Too Young to Retire

The magical age 65 that signaled retirement time for our parents might not hold true for the baby boomer generation. Sure the idea is appealing to call it quits before we are too old to appreciate and enjoy our second act. But the reality may be that 65 is just too young to retire. Some 76 percent of employees say they will continue working past retirement age, with 40 percent working because they want to and 35 percent because they will have to, according to a 2013 Gallup survey. Here’s when it might make sense to delay retirement past age 65:

When you still have a job. If you are currently employed, still able to effectively perform your duties and the job itself is not driving you crazy, it can make sense to stay at it for a while more. The longer you can delay taking Social Security, the more your monthly checks will ultimately be. For each year beyond your full retirement age that you delay collecting Social Security benefits up to a maximum of age 70, you will receive an additional 8 percent. You can also delay the time when you will become 100 percent responsible for your own health insurance premiums as long as your employer is picking up part of the tab. Finally, should you leave your job beyond the age of 50 either by choice or for reasons beyond your control, there is no guarantee you will quickly find another. Since 2007, job seekers over 55 have consistently experienced longer durations of unemployment than younger workers. For many people it makes sense not to give up a decent job before it is absolutely necessary.

When you are not yet financially prepared. If you retire at age 65, chances are you will live another 20 or more years in retirement. If you have worked and contributed to Social Security over the years, you will receive monthly benefits. However, these benefits were never intended to provide all or even most of your retirement income. The average monthly benefit for retired workers in August 2013 was $1,270, while the maximum monthly benefit for someone retiring at full retirement age (age 66) in 2013 is $2,533. Some bills will disappear in retirement, especially if the kids are done with their educations, the mortgage is paid off and the cars payments are done. But other expenses may quickly take their place, and health care costs will need to be an increasing consideration. Plus, when you retire, you don’t want to just get by. You want to enjoy yourself. You finally have the time to do what you want to, but if you lack the necessary funds you may find yourself unable to partake. Financial preparation for retirement should not be about just making it, but making it memorable.

When you have few other interests. If you have worked the last 30 plus years, your daily activities have to a large extent been defined by your job. Hours are filled with projects, deadlines, meetings and strategy sessions as you do what you were hired to do. When you retire you effectively flip the switch and become individually responsible for filling your time. Although the new freedom you will have is exciting and allows you to explore what you never could while tied to work, the hours can drag on if you do not have enough interests. It helps to prepare before you retire rather than suddenly go from a busy 40-hour work week to an empty calendar.

When you enjoy your current situation. There are some fortunate people who look forward to each day and the challenges it offers. They thrive on interactions with fellow workers and the camaraderie felt working toward a shared purpose. Even if a boss does not regularly offer recognition for a job well done, the steady paycheck does. If your job itself is interesting, why look for a way out? Various studies have found that one of the main things people miss when they quit working is the interaction with those they worked beside over the years. Some of our best friendships may start on the job. Retirement should be about having a choice in how you spend your time. If work is what you want to do in your second act, go for it.

Dave Bernard is the author of “I Want To Retire! Essential Considerations for the Retiree to Be“. Although not yet retired, he focuses on identifying and understanding the essential components of a fulfilling and meaningful retirement. He shares his discoveries and insights on his blog Retirement-Only The Beginning.

A Compelling Case For Work in Retirement

Many baby boomers want to keep working in some capacity after retirement. Whether the choice is theirs to make or they are forced to extend the length of their career, more and more people are building work into their retirement plans.

Reasons for wanting to remain a member of the working world vary, but a major factor is money. Most Americans don’t have enough savings to maintain their current standard of living in retirement. The median retirement savings balance for near-retirement households is just $12,000, according to a recent National Institute on Retirement Security report. And an incredible 45 percent of working-age households have no retirement account savings at all.

Social Security alone isn’t likely to provide enough income to make up for a lack of saving. The average monthly benefit for retired workers in August 2013 was $1,270, while the maximum monthly benefit for someone retiring at full retirement age (age 66) in 2013 is $2,533.

Although some costs tend to trend downward as you enter retirement, such as the costs for education for your children and reduced mortgage balances, other expenses cannot be avoided, especially when it comes to health care. The typical 65-year-old married couple without chronic conditions will pay $220,000 to cover medical expenses throughout retirement, according to calculations by Fidelity Benefits Consulting. That figure includes Medicare insurance premiums, but it excludes nursing home care.

Money issues can definitely be a driving motivation to incorporate work into your retirement plans. But it is not always just about money. There are certain aspects of work that some people actually enjoy.

A job can provide an opportunity to be a part of something that is bigger than just yourself. You get to engage with co-workers, work toward and achieve goals and receive recognition for your efforts. Even if your boss does not commend you on your efforts, you receive recognition in the form of a regular paycheck.

Work can also help to channel your energy into worthwhile results. Rather than just keeping busy living your retired life, you have the opportunity to make a difference. A job often feels more meaningful than reading a book, completing a hobby or taking a trip.

New challenges might be a regular part of your work. Dealing with them effectively requires you to use your mental and physical capabilities, and helps you to stay sharper for your life outside of the job.

Of course, not all jobs are rewarding, and not all companies provide a positive environment in which to spend your hours. Monotony, stress, deadlines and conflict can be unfortunate parts of the daily grind.

And not everyone has the option of choosing whether they will work or not. Some people, for reasons beyond their control, are unable to continue with their career. Many people end up leaving their jobs earlier than planned due to health problems, layoffs or to care for family members.

Some people continue to work in retirement for both the paycheck and the social benefits. Whether the underlying motivation is adding to a retirement nest egg or continuing the benefits of working with others to achieve something of worth, work is an option that baby boomers are increasingly adding to their plans for retirement.

From my US News & World blog. Dave Bernard is the author of “I Want To Retire! Essential Considerations for the Retiree to Be“. Although not yet retired, he focuses on identifying and understanding the essential components of a fulfilling and meaningful retirement. He shares his discoveries and insights on his blog Retirement-Only The Beginning.

How to Get Ready for Retirement at Any Age

How you should prepare for retirement often varies significantly by age. Here’s how to improve your retirement readiness at any age:

20s. When you are in your 20s, nothing is further from your thoughts than retirement. Planning for the future generally involves figuring out what is on the agenda for the coming weekend. Prudent individuals will realize the importance of saving early and the value of compound growth over many years. Years ago, I remember a 20-something co-worker who religiously saved a minimum of 10 percent of every paycheck. She always told me she did not feel it because the money came out before she even saw her check. If she maintained that commitment, I am sure her retirement life is better for it.

30s. In your 30s, additional responsibilities are likely to enter your life. Families are often started and careers evolve. You have probably left behind the unencumbered life of your 20s and changed into a parent and provider. Retirement is still a long way off, but planning for your future begins to make more sense. Along with figuring out how you will put the kids through college, you will hopefully begin to take advantage of a 401(k) plan or other savings vehicle offered by your employer. Pre-tax investments become very attractive at this age because your investments are able to grow tax free until you take the money out in retirement. With a seemingly endless stream of bills, you will begin to learn how to control your spending and budget. Retirement planning probably won’t be your main focus during this decade, but it becomes more important than deciding what you will do when Saturday rolls around.

40s. By this decade your kids are getting older, and probably starting to think about college and graduate school. Once you reach the end of the education process, you may be able to focus on reducing debt now that you actually have some money available to do so. Perhaps you will take a vacation with your spouse to celebrate successfully putting the kids through school. Retirement is getting closer and starts to come up in discussions, especially with those a bit further down the road in age. It is not too early to begin preparing, but there is still a lot going on to keep your mind and efforts otherwise occupied.

50s. Next you enter the fabulous 50s and begin to realize that retirement is no longer some distant dream. If you plan on retiring at 65, you have only 15 more years to build a nest egg to the point where you will not have to work if you so choose. Now is the time to begin to look more closely at how much you will need to live a fulfilling retirement. Determine where your money will come from and how much you will have accumulated by retirement age. If you are on track, you only need to continue what you are doing. If you fall short of what you will need to live the lifestyle you desire, you still have a little time to make adjustments. The longer you wait to ramp up your savings, the more difficult it will be to retire.

In addition to the financial aspects of retirement planning, your 50s should be a time to begin considering the essential elements that will allow you to live a meaningful and exciting second act. It is not too early to begin thinking about what you will do to stay mentally and physically active and avoid boredom in retirement. The time is right to explore hobbies and interests that will fill your daily life when you are no longer working. Now is the perfect time to rediscover the passions you ignored while tied to the working world. Think about what excites and thrills you and makes you want to get out of bed each morning. Retirement will be a time to focus on those satisfying endeavors. And you don’t have to wait until retirement to begin these activities. Retirement could be a much smoother transition if you start testing out these activities before you clock out of work for the last time.

60s. When you get to your 60s, retirement becomes a central focus. You are almost there. Hopefully you adjusted your savings strategy in your 50s to make sure you will be able to retire at your desired age. With fewer years left to make adjustments, you may be forced to live within the world you have created up to this point. Some people may have to consider extending their working days to fill in any deficits.

A fulfilling retirement has the best chance of being achieved over a lifetime of planning and preparation. Although 20 may seem too early to start, the sooner you get under way, the better chances you will have to end up happy in the end.

From my US News & World blog. Dave Bernard is the author of “I Want To Retire! Essential Considerations for the Retiree to Be“. Although not yet retired, he focuses on identifying and understanding the essential components of a fulfilling and meaningful retirement. He shares his discoveries and insights on his blog Retirement-Only The Beginning.