Postponing retirement is becoming a real, if unpleasant, option for many older Americans as they find that their savings matched with Social Security isn’t quite enough to pay the bills, much less fund the lifestyle they desire.
So instead of retiring at 66 or 67, they push that out to 70. Then maybe 75.
And perhaps with good reason. A Gallup poll in 2018 revealed that 46 percent of non-retired Americans are doubtful that they will have enough money in their retirement.
But what if you don’t want to wait until you are in your 70s or beyond to bring your working days to an end and start enjoying more leisure time? What if you don’t even want to wait until your 60s when Social Security kicks in?
Early retirement certainly sounds enticing, giving you time to embark on travel, hobbies or other new pursuits while you’re still (relatively speaking) young enough and healthy enough to enjoy them.
But is a nest egg that’s large enough to allow for early retirement an impossible dream?
Maybe. But maybe not.
If it’s something you aspire to, though, it’s best to get started now and not let any more years pass you by. For most people, it takes decades to accumulate enough money to fund a long retirement, so anyone seriously contemplating retiring at an early age – which means an even longer retirement – has no time to waste.
Here are a few steps to consider if you hope to have a chance:
- Increase your savings. This tactic is perhaps the most obvious and easiest to understand. It’s not necessarily the easiest to accomplish, though, because it requires discipline and sacrifice. However, if your company offers a 401(k) plan, one way to (sort of) sidestep the discipline part of the equation is to up your contribution, which comes right out of your paycheck without you ever touching the money and being tempted to spend it. Sacrifice isn’t as easy to avoid, especially for middle-income people who already feel like they don’t have much left over once the bills are paid. You may need to eat out less. Take shorter vacations closer to home. Watch TV instead of going out to the movies or visit the library instead of buying books. Every expense avoided is a little more money you can squirrel away for retirement.
- Reduce your tax bill. Taxes provide us with all sorts services, from security to highways to parks, but there’s no need to pay Uncle Sam any more than you actually owe. And many people do. Make sure you are taking advantage of every deduction you can. Also, consider adding your annual tax refund (if you get one) to your retirement savings instead of splurging on a trip to Spain or a new 80-inch TV.
- Dare to risk. It’s difficult to build a hefty nest egg with conservative investments, especially when you are giving yourself a shorter timeline, so to achieve an early retirement goal you may need to invest more aggressively. That’s more doable when you’re younger because if the market tumbles you’ve got time to recover. If your target early retirement age is 59 and you’re already 55, though, risk becomes – well, riskier. There’s not much recovery time built into that timeline.
- Decide whether early retirement is what you really desire. Sure, it sounds good. Sleep in whenever you want. Play golf or tennis – or both – every day. Take a cruise. And another cruise. And another one. But be warned. Some people who prepare themselves financially for retirement are unprepared emotionally. Without a daily schedule that gives them a purpose and provides a challenge, they feel adrift. That could go double for an early retiree who could be looking at four decades of retirement.
Early retirement, if that’s what you’re after, may not be out of reach. But there’s no time to waste.
Christopher J. Dixon was a founding member of Oxford Advisory Group. He focuses on innovative retirement strategies and can be seen throughout the Upstate of South Carolina and Florida demonstrating educational workshops about retirement plans and Social Security. He is radio host of "Reinventing Retirement Show,” a weekly broadcast heard in four states including South Carolina, North Carolina, Georgia and Florida.
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