Early retirement? As the old saying goes, if you can get it, it’s a good job.But as a respected economist points out, too many Americans get without saving enough.
Do not miss it
With office life shortened to remote work and the stock market boosting 401(k) accounts, early retirement has become one of the most searched terms on the web.
So why is the plan, in the words of economist Lawrence Kotlikoff, “one of the worst money mistakes”?
First of all, the market has since retreated, wiping out many of the gains from the pandemic and waking many from their dreams of early retirement.
But the reasons for Kotlikov’s skepticism are deeper.
“Poor Saver”
Few things reveal your money habits like retirement planning. Aggressive and ritualistic savers that start early are rewarded with steadily increasing account balances. Supercharging by reinvesting dividends and compound interest.
But the reality is that millions of Americans simply aren’t well prepared for traditional retirement, let alone early retirement, which many in their 50s are thinking about. They say they’ll “regret it” unless they do or give up on the plan…totally.
“As a group, we are poor savers, making early retirement unmanageable,” Kotlikoff said. I wrote a guest column CNBC last year. “Economically speaking, it is generally much safer and wiser to delay retirement.”
Note that Kotlikov ends the argument by stating that he plans to “die in the saddle” because he loves what he does. But those who are tired of corporate podiums and reporting to managers may have other plans for their golden age.
How many are really ready?
A study conducted by the Federal Reserve found that the median amount of Americans’ retirement account savings was $65,000. The median account value for senior savers between age 55 and her 64 is about $134,000, with life expectancy rising and inflationary pressures remaining, Increase in out-of-pocket medical costs take their toll.
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Underestimation of medical costs
Another study published in 2022 by Boston College’s Retirement Research Center found that: critical discontinuity How retirees recognize the impact of market volatility and longevity when calculating their retirement plans.
According to the report, many people overestimate the impact of market volatility and pay little attention to their lifespan and the impact that lifespan has on their finances. unexpected medical expenses — never mind long-term care — is a huge outflow of retirement funds.
The study’s data, author Wenliang Hou concluded, “confirms the importance of longevity and market risk and underscores the need for lifetime income through social security or private sector pensions. Finally, long-term care is also a significant risk facing retirees that is often underestimated.”
precarious social security
There may be a bright spot in the federal government’s primary social safety net. Social Security payments will rise in 2023, and some rule changes will give a boost to beneficiaries who have been waiting to take advantage of the system.
But Social Security is now on a timer.Without changes at federal level, economists estimate key funding to support Social Security lower by 2034Recipients got less than 80% of the expected effect.
Economists have long warned against overreliance on Social Security, and many are urging investors to plan for retirement assuming the system is gone.
Koritkov has long been a critic of government programs and their policies.For example, Koritkov I wrote an article in March. Criticized the Social Security earnings test and adjustment of the Reduction Factor (ARF) tax refund.
“The Social Security income test tops my list of our government’s most pointless and personally financially devastating policies,” he wrote.
The main advice from Kolitkoff, like others regarding retirement and access to Social Security benefits, is to wait and instead consider increasing your savings and investments while you continue to work. . The extra time keeps your investment working harder and longer. social security delays Benefits mean more monthly payments going forward.
Consider getting professional advice
Preparing for a comfortable retirement is nerve-wracking. Especially when consumer prices and interest rates are still stubbornly high.
One solution to help you sleep better: Find a financial advisor to help you navigate your finances, stay on track with your retirement plans, and ensure your assets are protected.
Researching and calling multiple financial planners can be a tedious task, but there is an easy way to find a handpicked advisor that meets your needs. Consultation appointment is free only takes a few minutes.
If you don’t know how to protect your finances during a recession, here are some suggestions: find the answer Sooner or later, time is on your side.
This article is for information only and should not be construed as advice. It is provided without warranty of any kind.
