By Eric Tashlein
Your Finances
Eric Tashlein
Have you thought about how old you will be when you retire? Maybe it’s no longer on your mind with the downturn, or maybe the feeling is stronger than ever. If you have developed a comprehensive retirement plan, you may have based it on age 62, age 65 or perhaps older. If you don’t have a plan, you may still have formed a vague idea of the age you would like to stop setting your alarm clock and start hitting the links on weekdays.
It may surprise you to know that only 35 percent of retirees say they retired when they had planned: 56 percent retired earlier than they wanted to, and 9 percent retired later, according to the 2018 report A Precarious Existence by the Transamerica Center for Retirement Studies.
Given these odds, it’s important that you incorporate the likelihood of being forced to retire earlier than expected into your retirement planning process. Retiring early lengthens the period of time you will need your assets to cover, which can lower the amount of spending you can enjoy year to year. It can also reduce your future income from Social Security and other sources and can lead to boredom and depression.
Among the 56 percent of those who retired earlier than expected, 54 percent cited reasons related directly to their jobs and 47 percent cited health or family issues. Only 10 percent retired because they could afford to do so earlier than planned, and just 1 percent retired due to a financial windfall. (The percentages add up to more than 100 percent because some survey respondents gave more than one answer.)
Among those citing employment-related reasons, 24 percent lost their job, 22 percent cited organizational changes, 15 percent said they were unhappy at their place of work, and 11 percent took a buyout.
Among those citing health or family issues, 28 percent cited their own ill health and 15 percent cited family responsibilities.
Among the 9 percent who retired later than planned, 75 percent said they needed the income and 64 percent said they enjoyed their work or wanted to stay active.
What can you do to prepare? The first step is to assess your current situation and identify the most likely threats to your desired retirement scenario. Take your health status, for example. Some people underestimate the impact of current health issues on their future workplace status, and other people develop health problems after they start planning their retirement. The first case requires you to be objective, and the second requires you to take into account different scenarios.
You may also consider hiring a certified financial planner. In conducting retirement planning for clients, CFPs take into account various aging scenarios to maximize financial outcomes, including the possibility of retiring at different ages.
Eric Tashlein is a Certified Financial Planner professional™ and founding principal of Connecticut Capital Management Group, LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice.