Most people dream of retiring somewhere around their early 60’s when they still have good health and are still quite mobile. While this is a great objective to strive for, chances are the majority of Americans won’t see that dream become a reality.
There is a lot of misinformation around what it takes to retire and how calculate when you can actually retire. And it depends on many different factors such as lifestyle, location, amount of extra activities outside of just living, and many other considerations. Many of these considerations aren’t considered early enough and so the future retiree finds themselves coming up short in many situations. The key to making this happen is to get the proper information and guidance so you know exactly what it takes and under what conditions.
Dreaming about retirement is one thing…delivering on those dreams may be an entirely different thing altogether. According to a survey from Bankrate, as reported in The Motley Fool’s article, “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. Social Security is a great addition but isn’t the only factor to consider when thinking about retirement age.
It’s also important to remember that eligibility for Social Security 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. And with the average Social Security benefit check being just a bit more than $1,400, which adds up to about $17,000 a year, there needs to be other sources of income for most to survive. If you are among those who have little or no money set aside for retirement, Social Security can be a lifeline to you in your later years.
Unfortunately, a large number of working Americans are way behind in their retirement savings. It’s estimated that around 42% have less than $10,000 set aside for the future. The real question is how they can retire at all let alone at an age such as 61. Not only is this unreasonable, there is no financial evidence to illustrate how this could possibly work. Even if you can manage to keep working until age 62, filing at that age has its own issues. It is often recommended that 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.
Let’s assume your full retirement age is 67, but you retire at age 62. Instead of receiving the full $1,400 per month at full retirement, your monthly benefit would only be $980. This is a significant difference…one that could make a difference in someone’s life if this was to be a prime source of income.
However, let’s say you really did want to retire at 61…what would you need to do? You’ll need to start saving and investing for retirement at a relatively young age and be willing to take a very aggressive position in your investments. If you start, for example, 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—assuming your investments earned a steady average of 7%.
If retirement is around the corner for you, one thing you should definitely do right away is to make sure your estate plan is in place. Whatever assets you do have will at least be protected and distributed according to your wishes. Also make sure you have a power of attorney and healthcare directive in place. An estate planning attorney can help you make sure all of these are in place and do exactly what you want to have happen for you in the future. And when it comes to retirement planning, most experienced estate planning attorneys can help guide you through this process as well and connect you with well-qualified financial and accounting professionals to help you retire at the appropriate age.