There are more people I meet every day who tell me that they aren’t planning to retire early, but instead enjoy life a little bit more and succumb to the fact that they are going to have to work later into their lives. While on the surface this all seems fine and dandy, the harsh reality is that there are some major pitfalls with trying to work past the age of 65. This strategy is often filled with some pretty unrealistic expectations and can have close to retirement families grasping for straws if their plan isn’t executed successfully. Here are my pitfalls and tips to be thinking about if you want to work past the age of 65.
- Reality vs. Fantasy- In a recent study by the employee benefit research, 38% of the workers in the workforce expect to retire at the age of 70 and only 4% actually retire at the age of 70. So, many workers are thinking that they will last until the age of 70, but the numbers drop off substantially before that time actually happens.
- What If Your Company Chops You?- Prudential recently did a study and every year a worker delays the inevitability of retiring it costs the company another $50,000. If you are at the upper end of the scale of income it could cost the company your salary plus 40% for benefits and taxes. This is why you are witnessing companies like Ford more aggressively offer job severance packages to keep their costs down. In addition, 2/3rd’s of the workers won’t even make it to the age of 65 with their employer due to layoffs, reorganizations, or overall general unhappiness with their job
- You Don’t Have The Job Skills- Even though many workers want to stay with the employers for the long haul, the question is do they have the skills to continue to add value to their company in their current job. When the costs become extremely high to a company, they start assessing if they can afford two lower salaries for the price of the one higher salary.
What can you do today to help avoid some of these planning pitfalls?
- Pay off your mortgage early- Forget about your interest rate on the mortgage. Apply extra principal every month, chunk down the mortgage when you get a bonus, or move to bi-weekly payments. It will lighten your backpack down the road.
- Sharpen the saw- Especially when it comes to technology skills, technology positions will be the ones in the most demand down the road.
- Make catch up contributions- In the year you turn the age of 50, you can start increasing your total 401k, 403b, etc. contributions from $18,000 per year to $24,000 per year. It would blasphemous not to do this.
- Start curbing your spending- Act as if…you were retired today- could you live off a lower income. Try it for a year- it is the only way to know.
- Get your affairs in order- Most people have collected lots of financial boxes over their lifetime. It is a great time to consolidate and your overall financial affairs in order.
If you are struggling with how to handle these as you plan for retirement, give me a call or shoot me an e-mail at firstname.lastname@example.org and we can help.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
Request a FREE no obligation consultation: www.oxygenfinancial.net
Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.