For those of you who are behind in saving for your eventual retirement, I want to encourage you to save while you have the opportunity. You may think you have plenty of time before the money is needed, or you may pass off the issue with, “I’ll just work longer, maybe until I’m 70.” However, the reality of a later retirement in order to accumulate more savings may ultimately be out of your control. Consider below – the expectations for a later retirement versus the actual experiences of retirees. A majority who thought they would retire post-65, in actuality retired before 65.
Current Expectations of Retirement vs. Actual Experience of Retirees (click each graph to view larger):
Source: Employee Benefit Research Institute and Mathew Greenwald & Assoc., Inc., 2013 Retirement Confidence Survey
In most cases, the reason for early retirement was not related to sufficient accumulation of retirement savings prior to age 65. As you can see from the chart above, the primary reason for leaving the work force earlier than planned was due to health problems or disability. So what does this mean to you?
First, saving for the future is something that needs to start now, while you are earning income. Other things will always compete for your income; education, bigger homes, newer cars, but you need to prioritize your retirement savings. The amount you need for a secure retirement might surprise you, due to the impact of inflation over a potentially long retirement.
Second, you need to prioritize your health now rather than later. Do everything in your power to get healthy and stay healthy, even though you are busy. As you see from the chart, health issues are the primary reason for leaving the workforce early. While you can’t eliminate every potential health problem that might come down the pike; you can go a long way toward reducing the risk of issues developing. Taking care of yourself physically includes getting annual checkups, exercising, eating right, and reducing the stress levels in your life. This is another form of risk reduction and is a critical part of your overall planning, just as much as insuring your home and auto or protecting your income stream through life and disability coverage. In reality, it takes a coordinated effort to ensure that all the pieces of your financial and physical life are working together toward your longer-term goals, but the key is to begin today.