The days of 65 being the magic age for retirement might be coming to an end. While young people just entering the workforce can’t imagine grinding away for that long, people in their 50s are finding they have not planned well enough to be able to retire that soon. According to a recent Gallup Poll, only 25% of adults expect to retire at 65, while 40% think they’ll have to work longer than that. As Estate Planning attorneys, we believe it’s important to plan for every possibility, including the possibility that events will arise that will affect your retirement plans. We take a look at some of the things that prevent people from retiring when they had hoped to and explain why retirement planning—like estate planning—can never start too early.
Reasons Texans and Arkansans Have to Put Off Retirement
If you’ve worked since you graduated from high school or college thinking you’ll be able to retire at 65 and live off of Social Security, you are in for a shock. In 2022, the average Social Security retirement benefit check is around $1,600 per month. For most people, that is not enough to make a mortgage or rent payment, pay utilities, and buy groceries, much less to also pay for the fun things they’d hoped to do in retirement.
- You didn’t maximize your Social Security benefit. You can begin collecting Social Security at age 62, but if you do, you will be leaving money on the table. If you were born after 1960, you cannot collect your full retirement benefit until you are 67. If you can wait until age 70, you could get an additional 8% in Social Security.
- You haven’t saved enough. This is the bottom line for most people. When you retire, you stop earning a salary, which means you have to have enough accessible money saved to live off of. If you retire at age 65 and expect to live until age 85 or older, you need to have retirement savings of well over $1 million.
- You lost your spouse early. If you had counted on having two Social Security retirement benefits to support you, the loss of your spouse will mean you will only have one benefit. In addition, you will have lost your spouse’s earnings and the opportunity to maximize their retirement plan.
- You made risky investments. If you made risky investments to try to make up for not saving enough for retirement and it didn’t pay off, you could be deeper in the hole than when you started.
- You are still paying off a mortgage. You might have bought a house later in life or taken out a second mortgage to pay for one-time expenses along the way, and now you are approaching 65 and haven’t paid off your house. Having to continue to make mortgage payments is a big drain on retirement savings.
- You have a lot of debt. Credit card debt, car loans, a mortgage on a second home, and other kinds of debt can force you to put off retirement until they are settled.
- You are supporting children or parents. If you are still paying for college, weddings, or other expenses for your children, or you are footing the bill for your parent’s assisted living or in-home care, retirement might still be years away.
- You have an extravagant bucket list. If things like travel, a vacation home, home improvements, paying for grandchildren’s college, and leaving a legacy for your heirs are on your retirement bucket list, Social Security and the savings you have might not be enough to fund your plans.
If you are over 55 and reading this list, your options might be limited. However, our hope is that you are reading this when there is still time to plan for the retirement you hope to have.
How to Plan for the Retirement You Want When You Want it
The ideal retirement starts with a reasonable plan. We all know that the earlier you start saving, the better off you will be, but many of us start our adult lives with lower-paying jobs, student loans, and irresponsible spending habits. The American Association of Retired Persons (AARP) recommends the following to people over 50, but they are good tips for everyone:
- Set up automatic retirement contributions. Take a hard look at your budget and identify areas where you could cut back on spending. Re-allocate that money into your 401k.
- Pay down and then avoid debt. Get those credit cards paid off and commit to not acquiring more debt. If making some sacrifices now means an earlier start to a rewarding retirement, it will absolutely be worth it.
- Manage your investments. Make sure your nonretirement investment portfolios are working for you. Automatic investments can take advantage of fluctuations in the market.
- Max out contributions when you can. Take advantage of your employer’s matching contributions by putting in the maximum allowed. Also, find out if your company has additional retirement savings plans available.
- Plan for emergencies. It’s important to maintain an emergency fund of fully accessible cash on top of your retirement savings in case you get laid off or become disabled before reaching retirement age. This money can also be used to cover unexpected expenses.
- Work as long as you can. While it might make sense to take an early retirement buy-out from one employer, you don’t have to stop working completely. Taking on a new, lower-stress job means you are still earning an income, still contributing to retirement savings, and still engaged and active.
Hindsight is 20/20 when it comes to saving for retirement, but we hope these tips help you plan ahead.
Are You Looking for an Estate Planning Attorney in Texarkana, TX?
If you are looking for estate planning advice, you need to speak with an experienced estate planning attorney as soon as possible. Contact us online or call our Texarkana office directly at 903.223.5653. We also have offices in Tyler, Paris, Longview as well as Magnolia, AR!