• Lavina Nagar, CFP®

When would you like to retire? Facts, Expectations, and a Little Digging…

When would you like to retire? This is one of those questions that rarely generates an ambivalent response. Most responses normally tend to fall in one of the two categories. One, who are ready to retire tomorrow, or the other, who will work as long as they can.

In a recent study by Employee Benefit Research Institute (EBRI), nearly 38 percent workers expect to retire at 70 or beyond. However, only 4 percent of actual retirees report this was the case. On the flip side, 9 percent of workers say they plan to retire before age 60, whereas 39 percent of retirees reported they retired that early.

So, what is contributing to the gap between purported expectations and actual practice? Before addressing this question, let us step back and look at some of the eco-social factors in which our original question has its roots.

Developments in modern medical science has increased life expectancy. Average life expectancy at age 65 for a man is 83, and for a woman is 86 (2). This produces a retirement that can last 20 years or more. Number of centenarians (people age 100+) have increased by 44 percent in the last decade. Retirement for a centenarian may span almost the same length of time as working years (close to 40 years)! Another important shift that has happened is the disappearance of pension plans. Retirement has become a personal responsibility. And finally, the recent economic uncertainty has given rise to working part/flex-time in retirement. In many cases, desire to work in retirement is also driven by non-economic reasons like to maintain social connections, or simply because people enjoy what they are doing.

These factors support the EBRI study responses - that nearly 38 percent of workers plan to work until age 70 or beyond. So why the disparity between workers’ plans and retirees’ facts? Because life happens. Health issues, changing job landscape, layoffs, need to care for a loved one, are some of the multiple factors that push people into retirement much earlier than they might have planned. Of course, there are also those people who retire earlier because they have saved sufficiently and want to spend more time with their families, or do activities that they enjoy and feel passionate about.

So what can we do about this gap between our expectations and where life takes us. A good place to start would be to hope for the best and plan for the worst. In short, planning is the key. It is never too early to plan. A good plan helps in good and bad days. Optimize savings in your higher earning years. And invest. Invest in yourself. We are living longer and we are living in a fast-changing world. Invest in your learning. Invest in your health. Invest your money smartly with the big picture in perspective. And last but not least, cover yourself for the unexpected.


(1): https://www.ebri.org/pdf/surveys/rcs/2017/RCS_17.FS-2_Expects.Final.pdf

(2): https://www.cdc.gov/nchs/data/nvsr/nvsr65/nvsr65_08.pdf

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