If you thought that retirement started at 65 for most Americans, think again — according to a recent Gallup poll, the average reported retirement age for currently retired Americans is 61. And according to the Centers for Disease Control and Prevention, a person who has made it to their early 60s can, on average, expect to live another 23.3 years.
That’s a lot of retirement time to finance! Will you be ready?
There’s really only one way to find out, and that’s to run the numbers. And unless you’ve got some accounting chops, it probably makes sense to sit down with a qualified financial advisor. They have tools at their disposal to make personalized projections based on your current assets, goals and risk tolerance. And they can stress test the plan for things like nursing home expenses or the death of a primary breadwinner.
Workers may exit the workforce earlier than expected for a number of reasons such as illness, injury, unexpected job loss or the need to care for a family member. Hopefully, you’ll be able to make the decision about when you’ll stop working. But it’s important to keep in mind that the timing of your retirement ultimately may not be under your control — and plan accordingly.
So how do you plan for the unplanned?
Add a buffer to your retirement projections. Ask your advisor to map out exactly what you’d need if you retire at 61 — the most common age. This may require you to start bumping up your 401(k) contributions. Be wary, however, of taking on too much risk when you’re close to retirement to try to boost returns.
Have an alternative retirement plan. In case you need to stretch your retirement dollars, consider investigating the cost savings from moving to another state or downsizing. You may never need to activate your plan, but at least you’ll be less likely to have to scramble at the last minute if you’re left with a shortfall in your retirement budget.
Start reducing expenditures. Perhaps you can get away with just one car. Or exercise at home and save the cost of a pricey gym membership. Or eat in more often and bank the savings. Or ditch an expensive vacation and plan a staycation instead.
Make sure you’re adequately insured. Purchasing long-term care insurance can be expensive, but it may be worth the price depending on your age and situation. Policies come in many different forms these days, so it’s important to comparison shop. You can also consider taking out private disability insurance in addition to any coverage offered by your employer. This could help cover a shortfall, should an injury remove you from the workforce prematurely.
Start taking better care of yourself. While there are no guarantees when it comes to your health, adopting good habits can increase the odds of a long, healthy life. Eating well, exercising, seeing the doctor regularly, getting enough sleep and managing stress with practices like meditation, journaling or just staying involved with friends can help stack the deck in your favor.
When it comes to retirement, you don’t want any last-minute surprises. It’s smart to proceed with eyes wide open and plan for the unplanned.
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Perhaps you’ve lost a job, faced an illness or have been delt a family crisis that emptied out your emergency fund. What are your next steps?
You’re eyeing center-hall colonials in your neighborhood and dreaming about the garden you want to plant in the backyard and all the holiday celebrations you’ll host. You’ve saved toward this goal and think you’re ready to pull the trigger. But the real question is: How much house can I afford?
Or is it?
Social Security’s financial cliff is coming closer into view. Experts project that the fund that pays for government retirement benefits through FICA taxes will be depleted within the next 15 years.
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