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One of the most common issues faced by those aged 50 and over is the question of whether or not to retire from work. As people near their middle age years, the dilemma of enjoying the rest of their lives at a leisurely pace, or continuing to work to get their maximum pension, looms in the horizon.
Ideal Age to Retire
The results of the Global Benefit Attitudes Survey 2015/2016 revealed that among 5,100 American employees, 23 percent believed they will have to work past 70 years in order to achieve a comfortable retirement income. Retiring at age 65 seems ideal to a quarter of employees. However, only 2 percent expect to retire before 55. A third of working Americans even expect to stop working later than planned. For many employees, the only way to attain financial security after retirement is to work longer. But what happens if you are thinking of retiring on or before 55? What are the implications faced by early retirees?
Consequences of Retiring at 55
Before you can call it quits, it is vital to have a well-thought out plan for retreating. That means first, looking at your longevity. Granting that you will enjoy the average life expectancy, this implies projecting your financial needs into the next decades. As a general rule of thumb, you will need 70 to 80 percent of your last salary to live a decent life once you are pensioned. You will need to factor in health care costs that you have to pay yourself once you are superannuated. Remember, employers typically absorb 75 percent or more of the cost of health care coverage, and Medicare will only be available at age 65. One way of getting around this is to seek available part-time work that pays for health insurance, if you are unable to include this expense in your calculations.
Since Social Security benefits won’t start kicking in until age 62, you must find alternative financial sources. That means savings and investments. Charles Farrell, CEO of North Star Investment Advisors, says retiring at 55 implies saving 18 times of your annual income to replace 75 percent of your salary when retired. Scaling back costs (frugal living) and downsizing are viable and doable options. Making your money earn for you (stocks and investments) should generate funds that you can put away for your retirement nest to avoid financial stress often faced by pensioners and seniors.
Maximizing Your Time
Lastly, make sure that you know how to fill your time when retired. The Harvard Study of Adult Development identified key elements which make retirement an enjoyable experience, which include a new network of friends and time to get creative and physically active. You can also start your own business or offer consultancy services that will generate income. All of these options will help you keep a keen mind and an enthusiastic spirit during your retirement years.
Stewart, Cooper & Coon, has helped thousands of decision makers and senior executives move up in their careers and achieve significantly improved financial packages within short time frames. Contact Fred Coon – 866-883-4200, Ext. 200