Many Americans dream of retiring early. A 2015 study found that a majority of those with assets of $1 million or more planned to retire by age 56... and 20 percent planned on retiring by 40! Despite these numbers, more than half of those polled indicated that their retirement plans, early though they may be, also included part-time work.
9These figures aren't that surprising, given that working hard, saving a lot, and exiting the rat race with plenty of time left to enjoy those golden years has long been the sequel to the American dream. Substituting the 9-to-5 grind for days spend relaxing on the golf course or by the pool doesn't sound so bad.
But not everyone shares the desire to retire early. In fact, some don't choose to retire before the average age of 64 (for men) and 62 (for women) even if they do have enough saved to support their desired lifestyle. Here are three common reasons why you might not be dreaming of early retirement.
Retirement Planning Advisors Weigh In: I Love My Job!
For some, the thought of early retirement doesn't have much appeal simply because they really enjoy their jobs. If you're fortunate enough to have a job that you love, it's not surprising that you're not in a hurry to hand in your resignation. When you wake up excited to go to work every day, pushing that retirement age back makes sense as part of your financial planning strategies. And on the practical side, working longer means more time to build up your retirement savings, whether that's through an IRA, a Roth IRA, or an employer-sponsored 401(k)... and if you have one of these retirement accounts, working longer also means more time to accumulate savings through an employer matching contribution plan! Plus, the longer you work, the less time you'll need to live off your savings.
Wealth Management Strategies: More Income, More Chance to Grow Wealth
Simply put, the longer you continue to draw a paycheck, the more opportunity you have to grow wealth. Simply sticking your money in a savings account isn't enough; in order to truly grow wealth, you must take advantage of compound interest.
Sit down with a trusted retirement planning advisor or fee only financial advisor to discuss your options. Together, you can develop a comprehensive financial plan that can help you achieve your investment and retirement goals.
The Financial Planning Process and the Unknowns of Retirement
When you're engaged in the retirement planning process, determining how much you need to save before retiring is key. In order to accomplish this and create a budget and goals, you must define several variables, such as:
- How long your savings will need to last, i.e. your life expectancy
- Your investments' potential rate of growth
- What type of lifestyle you desire in retirement, or how much you'll spend per year
- The rate of inflation
- The future cost of healthcare
Creating a realistic retirement plan requires realistic answers to these unknowns, but aside from averages, there's really no way to accurately predict these factors. Instead, it's necessary to follow a general rule: save soon and save often. The earlier you start saving, the more time you'll have to prepare for any eventuality.
Overall, there's no one single "right" time to retire. Speak with your retirement planning advisor to determine a timeline that works for your specific situation.