“There's nothing wrong with looking forward to retirement and even planning an early exit from the workforce. However, Americans may be a bit misguided, when it comes to this particular milestone.”
If you work for a living, chances are good you like to daydream about what your life will be like during retirement. We all do it and so do younger workers who have yet to pay their dues. However, according to a survey from Bankrate, as reported in The Motley Fool’s article titled “Americans’ Ideal Retirement Age–and Why It’s Not Realistic,” adults across the board think that 61 is the ideal age to retire. Is that realistic?
Unless you can live without Social Security during retirement, 61 is not your magic number. Most American retirees can’t live on Social Security alone and those benefits have a major impact on the ability of most retirees to keep up with their bills. However, eligibility doesn’t start until age 62. The people in the survey either didn’t know they can’t collect Social Security until they turn 62 or they are assuming they can get by without it.
The average Social Security benefit check is just more than $1,400, which adds up to about $17,000 a year. If you are among those who have little or no money set aside for retirement, that’s a lifeline.
A large number of working Americans are way behind in their retirement savings. It’s estimated that around 42% have fewer than $10,000 set aside for the future. How will they retire at all, much less retire at age 61?
Even if you can manage to keep working until age 62, filing at that age has its own issues. Today’s workers need to wait until their Full Retirement Age, or FRA, in Social Security’s terms, to receive their full monthly benefit. The difference is large enough to make it worth the wait.
Assume that your full retirement age is 67, but you retire at age 62. Instead of $1,400, your monthly benefit would be $980.
However, what if you are among those who really want to retire at 61? You’ll need to have started with saving and investing for retirement at a relatively young age and have been willing to take a very aggressive position in your investments. If you started at age 26, with a goal of retiring at age 61, and you are employed by a company with an employee sponsored 401(k), you’d have had to contribute $1,500 a month for thirty-five years to amass enough money—if your investments were earning a steady 7%.
If retirement is around the corner, one thing you can do is make sure your estate plan is in place. Therefore, whatever assets you have, will be distributed according to your wishes. Make sure you have also taken care of having a power of attorney and healthcare directive in place. Speak with an estate planning attorney to make sure these documents are prepared correctly.
Reference: The Motley Fool (July 18, 2018) “Americans’ Ideal Retirement Age–and Why It’s Not Realistic”