Retiring Early Has an Unexpected Downside That Most People Forget to Plan For
Being able to retire early may sound like a fantastic scenario. But the experience of numerous retirees today may change this perception and lead you to rethink your own plans for the future. According to a NerdWallet survey, people tend to stop working at the age of 59 on average.
A bit surprising since the ‘traditional’ age for retirement is usually during a person’s 60s, specifically at 65 years old. After all, full retirement benefits from one’s Social Security doesn’t really kick in until 67 years old for some people.
So, what’s the downside of it all?
Apparently, statistics show that a significant portion of retirees didn’t actually retire voluntarily. About 36% of them say that they didn’t have a choice in the matter. Even more concerning is that 9% of these forced retirements were caused by job loss while 18% had to stop working because of various health concerns. As can be expected, these scenarios can cause major issues in one’s retirement and financial plans.
Thus, experts are recommending people to plan for the possibility of a forced early retirement when they get to planning their future. Doing so would better help one determine exactly how much to save each month for their retirement fund.
For example, take a hypothetical 25-year-old worker. Say he has an annual income of $40,000 while having about $10,000 in his savings. Expecting to retire at 67 and live until 95, he puts away $483 each month. However, suddenly being forced to retire at an earlier age would change all these.
If his retirement age suddenly changes down to 59, the same worker would’ve needed to set aside $883 per month, almost double of his initial monthly retirement savings.
So, what should be people’s take away from the above scenario?
Financial experts say that everyone should probably try to save like they’re retiring early even if they aren’t necessarily planning to. What more, NerdWallet retirement specialist Arielle O’Shea recommends people in their 20s to put away as much money towards their retirement now.
Meanwhile, she tells people, who are already in their 30s or 40s, not to despair. Instead, she advises them to take advantage of any positive changes in their finances. This may include putting the savings they’ll get from their kids’ transfer to a cheaper school towards their retirement fund.
Planning For Various Situations
For now, one of the best courses of action people can take for their retirement is to plan for a variety of outcomes. One can calculate how much to save considering different ages of retirement. This would help in determining changes in one’s financial targets and planning to meet them still.
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