Skip to main content

You are here

Advertisement

Sooner or Later

During the third week of October, more than 100 professionals gathered at the Fall 2013 ASEC Partners’ Meeting to discuss the obstacles to, and possible solutions for, retirement savings. National Save for Retirement Week is upon us, and America Saves Week will be here before we know it. So too, retirement — which, as advisors know, seems far away to many, and actually is far away for some — often seems to be a far-off goal, something that can wait for another day, a more “convenient” time when we have more free time and perhaps fewer financial demands.

It’s easy, in the normal press of life, to put off thinking about retirement, much less thinking about saving for a period of life many can scarcely imagine. We all know we should do it — but some figure that it will take more time and energy than they can afford right now; some assume the process will provide a depressing, perhaps even insurmountable, target; and others — well, many don’t even know how to get started.

Advisors know all this, of course. But here are six reasons that can help those you work with focus on saving for retirement now:

1. Because you don’t want to work forever.

No matter how much you love your job today, that might not always be the case. Someday you might want the flexibility to make a change on your terms — if not to retire, then maybe to cut back on your hours, or maybe even to pursue other interests. The sooner you’ve made your financial preparations, the sooner that decision can be your choice, rather than one forced upon you.

2. Because living in retirement isn’t free — and it might cost more than you think.

Many people assume that their expenses will go down in retirement, and for some they may. On the other hand, retirement often brings with it changes in how we spend, and on what — and that doesn’t necessarily mean spending less. For example, research by EBRI has found that health-related expenses are the second-largest component in the budget of older Americans, and one that increases steadily with age. Note also that long-term care insurance is a growing area of concern for retirees — according to government estimates, 12 million older Americans will need LTC by 2020. However, in most cases LTC is not covered by Medicare; moreover, medical care is expensive and the need for it can be indefinitely long or even permanent.

3. Because you may not be able to work as long as you think.

The Retirement Confidence Survey (RCS) has, over its 23-year history, consistently found that a large percentage of retirees leave the work force earlier than planned — 47% in the 2013 RCS, in fact — and many retirees who retired earlier than planned cite negative reasons for doing so, including health problems or disabilities (55%), changes at their companies such as downsizing or closure (20%); and having to care for spouses or other family members (23%).

Some retirees do mention positive reasons for retiring early, such as being able to afford an earlier retirement (32%) or wanting to do something else (19%), but just 7% offer only positive reasons.

4. Because working longer may not be enough.

One of the more recent alternatives proposed is that of continuing to work longer which, if possible, would serve to postpone the depletion of retirement income resources and provide additional time to save. As noted above, this assumption might not prove to be a viable option for all; and even for those who can and do so, even working until age 70 may not be sufficient for some individuals, EBRI research has found.

5. Because you don’t know how long you will live.

People are living longer. The longer your life is, the longer your retirement could last — especially if, as noted above, it begins sooner than you planned. Retiring at age 65 today? How big a chance do you want to take of outliving your money in your old age?

6. Because the sooner you start, the easier it will be.

What are you waiting for? Sooner or later, you know you need to. And the later you start, the harder it can be. A good place to start is the BallparkE$timate,® and with the other materials available at www.choosetosave.org, as well as www.americasavesweek.org.

For more information on retirement saving and spending:

Income Composition, Income Trends, and Income Shortfalls of Older Households
How Does Household Income Change in the Ten Years Around Age 65?
Is Working to Age 70 Really the Answer for Retirement Income Adequacy?
Spending Adjustments Made By Older Americans to Save Money
Expenditure Patterns of Older Americans, 2001-2009

Advertisement