Last week marked National Save for Retirement Week, an opportunity for all of us to consider our savings strategies. Started by two senators about ten years ago, it’s a week that asks us to find ways to buckle down and stretch our budgets to allow for greater contributions to our retirement accounts. Maybe I was imagining it, but I thought that I saw people brown-bagging their lunches and carpooling to save on gas money all over Costa Mesa.
These small-scale ways of saving, which lots of financial blogs suggest, are great habits over the long run, and of course I encourage them if you have a mind to. But our final installment of Retirement Regrets gives us instead a big factor that can affect our retirement savings:
Regret:
“I wish I would’ve asked for advice on when to retire.”
Brown-bagging your lunch could save you thousands over the years, but just one year of premature retirement could cost you thousands in savings—and much more in expenses. Retiring at the right time is one of the most important decisions you and your retirement planner can make. This is because the decision cuts into your savings in two ways: retiring early means you have less time to put income into savings, plus you have more time in retirement when you’re living off your account instead of your regular income.
Something to keep in mind is that retiring exactly when you want to is a luxury. A 2014 study by the Employee Benefits Research Institute[1] found that about half (49%) of retirees ended up leaving the work force before they had planned. The reasons for doing so were largely uncontrollable: personal health concerns, caring for a loved one, and work-related reasons were the three main causes. As you can see, so often our date of retirement chooses us, rather than the other way around.
Unfortunately we can’t look into the future and see our actual date of retirement. This makes a specific plan all the more important. What you can do as you consider your savings is to make sure you have a robust plan with a realistic retirement date based on your financial situation, and then do your best to stick to it. And of course, working as long as is comfortable for you can make a big difference.
Having the input of a retirement planner can really put you at ease as to when you can realistically retire. If you’re unsure, come see us in Costa Mesa and one of our financial professionals will be happy to help.
[1] Helman, Ruth, et. Al. “The 2014 Retirement Confidence Survey: Confidence Rebounds—for Those With Retirement Plans.” Employee Benefit Research Institute. Ebri.org. March 2014. Web. Oct. 25, 2015