Monday, August 24, 2009

What if You Don't Plan to Retire?

Do you plan to retire? Whether you answer yes or no your financial actions should not be different—you still need to build a nest egg.

Retirement used to conjure up images of traveling the world and lazing on sandy beaches. Now many people think of retirement as just a chance to do something different. But a 2009 study by Employee Benefit Research Institute (EBRI) revealed that only 34% of current retirees actually continued to work in their golden years. That’s way down from the 72% that said they planned to continue working. EBRI found that the majority (89%) of those that said they planned to keep working attributed financial security as their number one reason to work.

ERBI also found that 47% of retirees actually retired sooner than they planned. The median age for retirement is 62. Health is often stated as the biggest reason for retiring. There is also the fact that older workers are sometimes encouraged to retire through company early retirement programs and/or layoffs.

The lesson learned from ERBI studies is that what we say and what we do are often different. When you are young and healthy you might think that you’ll keep working well beyond retirement age, but stuff can and does happen.

So if you’ve been acting as though retirement was too far off to think about squirreling away money, think again. And don’t count on Social Security. If there are no changes made to Social Security the program is projected to begin running out of funding in 2037. How old will you be then? And in the last few days the trustees who oversee Social Security announced that there won't be a cost of living adjustment for the next two years. That hasn't happened since automatic increases were adopted in 1975.

Regardless of what happens with Social Security we all know that we can’t expect Social Security alone to cover our financial needs.

Tomorrow we will look at how much money you might need for your upper 60’s and beyond.

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