Planning to delay retirement may not rescue you from poor savings

    Date:

    Share post:

    Planning to delay retirement may not rescue you from poor savings


    Alistair Berg | Digitalvision | Getty Images

    Planning to work longer is a popular escape hatch for Americans who feel they’ve saved too little to support themselves in old age.

    About 27% of workers intend to work in retirement because they need to supplement their income, according to a new CNBC and SurveyMonkey survey. They polled 6,657 U.S. adults in early August, including 2,603 who are retired and 4,054 who are working full time or part time, are self-employed or who own a business.

    While working longer is among the best ways to shore up one’s nest egg, the plan may backfire, according to retirement experts.

    Workers may not be able to work into their late 60s, early 70s or later due to an unexpected health complication or a layoff, for example.

    “It sounds great on paper,” said Philip Chao, a certified financial planner and founder of Experiential Wealth, based in Cabin John, Maryland. “But reality could be very different.”

    If workers lose those wages, they’d have to figure out another way to make their retirement savings last.

    Workers often retire earlier than planned

    A nonexistent ‘escape valve’

    Americans generally use a later retirement age “as an escape valve which doesn’t necessarily exist,” Chao said. “But saying it and doing it are two totally different things.”

    It could ultimately be a “very dangerous” assumption, Chao said.

    Many people who retired earlier than planned, 35%, did so because of a hardship, such as a health problem or disability, according to the EBRI survey. Another 31% of them retired due to “changes at their company,” such as a layoff.  

    It sounds great on paper. But reality could be very different.

    Philip Chao

    founder of Experiential Wealth

    More than half, 56%, of full-time workers in their early 50s get pushed out of their jobs due to layoffs and other circumstances before they’re ready to retire, according to a 2018 Urban Institute paper. Often, such workers earn substantially less money if they ultimately find another job, the paper found.

    Of course, some people exit the workforce early for positive reasons: More than a third, 35%, of people who retired earlier than anticipated did so because they could afford to, EBRI found.

    There are benefits to working longer

    Some people continue to work longer because they like it: About a quarter, 26%, of workers said they want to work in retirement, and 17% of retirees continue to work in some capacity because they enjoy it, according to the CNBC retirement survey.

    Americans may also get non-financial benefits from working longer, such as improved health and longevity. However, research suggests such benefits depend on how much stress workers experience on the job, and the physical demands of their labor.

    Working longer also appears to be more of a possibility for a growing share of older workers.

    “A shift away from a manufacturing economy to one primarily focused on delivering services and information facilitates working to an older age,” Jeffrey Jones, a Gallup analyst, wrote.



    Source link

    spot_img

    Related articles

    Elon Musk’s X and Starlink face nearly $1 million in daily fines for alleged ban evasion in Brazil

    Combinations showing Entrepreneur Elon Musk (L) and Brazil Supreme Court Justice Alexandre de Moraes (R)Reuters (L) |...

    Watch: Biden delivers remarks at the Economic Club of Washington, D.C.

    President Joe Biden is speaking at the Economic Club of Washington, D.C., on Thursday, where he is...

    Rallying Microsoft shares could be forming the troubling 'bear flag' chart pattern

    I often refer back to the work of financial pioneer and "Father of Technical Analysis" Charles Dow,...

    Butler National Corp director buys $65,000 in stock

    Butler National Corp director buys $65,000 in stock Source link