|
| |
Retirement May Come Earlier Than You Think
|
|
| |
| |
It's no secret that many baby boomers are planning on working later in life to shore up a nest egg that is smaller than it should be. But it's also the case that a significant number of older workers may not be able to control the timing of their retirement, which has a bearing on their financial security.
According to a survey conducted by the Employee Benefit Research Institute (EBRI), almost half (47%) of retirees said they retired sooner than they had planned. When retirees were asked why they retired early, 42% said health problems or disability, 34% said employer downsizing or closure, and 22% mentioned other work-related reasons.¹
A Plan of Action
Although these facts present a stark picture, there are things you can do to potentially enhance your nest egg and prepare yourself for unexpected events. As a start, consider the following:
-
Invest as much as you can while you are still working. You can contribute up to a maximum of $5,000 for the 2009 tax year to either a traditional IRA or a Roth IRA. (Since investors must meet income thresholds to qualify for a Roth IRA, log on to www.irs.gov to make sure you qualify.) An annual catch-up contribution of $1,000 is permitted for investors aged 50 and older. If you have access to an employer-sponsored retirement plan, such as a 401(k) plan or a 403(b) plan at work, you may be able to contribute up to a maximum of $16,500 for 2009. Those aged 50 and older can make an additional catch-up contribution of $5,500. These amounts are maximums established by the federal government; check with your employer to determine whether your plan imposes lower limits.
- Consider the best time to start collecting Social Security benefits. If you find yourself facing the prospect of retiring earlier than you had planned, consider whether collecting Social Security at age 62, when most people initially qualify, is in your long-term best interest. Collecting Social Security early results in a permanent benefit reduction of as much as 30%. Waiting until your full retirement age enables you to get a larger benefit. (Log on to www.ssa.gov or review your annual Social Security Statement to estimate how much you can expect.) Delaying beyond your full retirement age may entitle you to a delayed retirement credit of as much as 8% annually, depending on the year of your birth and how long you wait.
- Weigh the benefits of working during retirement. You may be able to delay your Social Security benefit only if you can afford to do so. Planning for a so-called retirement career could help you bridge the gap between your current full-time job and exiting the workforce completely. Continuing to work in some capacity may enable you to add to your retirement nest egg and to delay withdrawals until you are required to make them. There may be opportunities for part-time or seasonal work or to capitalize on a personal interest.
- Evaluate your cost of living. Adjusting your annual budget may be needed if an unexpected change in your employment status comes your way. Certain expenses, such as your mortgage, utilities, and medical insurance may be relatively fixed, but you may be able to control others, such as vacations, clothing, or entertainment. Be sure to maintain an account with liquid savings that you can tap to pay for unexpected expenses such as a household or car repair. With planning, you may be able to live within your means while enjoying the lifestyle that you desire.
¹Source: 2009 Retirement Confidence Survey, Employee Benefit Research Institute, April 2009.
© 2009 Standard & Poor's Financial Communications. All rights reserved.
©2009, Kelly Ruggles Web site
Kelly C. Ruggles is a fee-based financial planner located in Spokane.
Kelly C. Ruggles, President of American Reliance Group, Inc., a registered investment advisor.
Kelly Ruggles is the author of "The Financial Playbook" for Retirement
Kelly C. Ruggles does not intend to provide personalized investment advice through this publication and does not represent the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions
|
|
|
|
|
