Can you identify a tangible benefit to your savings plan?
Let’s say you’ve calculated your retirement budget, and you’re confident in your replacement ratio (the amount of income necessary to maintain your current standard of living in retirement). Your retirement savings plan is adequate to cover your everyday expenses and to allow for some special experiences. Retire at will, but remember…if you’re still able to work it might be worth your while to do so. According to the Urban Institute Retirement Policy Center, working an additional year can help increase your annual retirement income by as much as 9%. Even if you’re at full retirement age, postponing retirement and waiting longer to draw Social Security benefits can also increase your monthly distribution.
Can you secure health care coverage?
Many Americans will postpone retirement because they don’t want to lose employer-provided health care coverage. Although you may have adequate resources to retire earlier, it is likely cost prohibitive to pay for private medical insurance until you qualify for Medicare at age 65. Health care costs are on the rise. They’ll continue to be a major factor for those in good health as well as those who are managing chronic conditions.
Can you survive a financial crisis?
In its 2014 Retirement Confidence Survey, the Employee Benefits Retirement Institute reported that 36% of worker respondents and 29% of retiree respondents said they had less than $1,000 in savings. Unplanned expenses, particularly those related to health care, can escalate quickly. Your retirement savings plan should be structured to provide for cash flows to cover daily cost of living expenses as well as emergencies or unplanned expenses. Are you confident that your current plan is adequate to cover both kinds of expenditures? The risk-averse may consider working longer in order to increase the adequacy of your savings plan.
Can you make saving for retirement a priority?
As noted in EBRI’s 2014 annual Retirement Confidence Survey, a sizable percentage of workers report they have virtually no savings and investments. Fifty-three percent of workers cite cost of living and day-to-day expenses as the leading reasons for not saving (or saving more) for retirement. However, if you don’t make saving for your retirement a priority, no one else will do it for you.
Remember, there will always be demands on your money. The ability to prioritize your budget is the key determinant of your timeline for retirement. The sooner you make saving for retirement a priority, the sooner you can retire.
Employee Benefit Research Institute Retirement Confidence Survey 2014.
The Urban Institute’s Retirement Policy Center, “Fact Sheets on Population Aging.”
The Urban Institute, Retirement Security Data Brief, Number 10, December 2013.