If you are better than 50 years old, you are probably thinking about retirement. You might be asking yourself, “when should I retire?” Like most things in financial planning, finding the “right” time to retire depends on several factors. And now, there is a new term some folks use to talk about the process of transitioning from working to full-time retirement. They call it PRETIREMENT. For a long time, I have told clients to think about retirement in three steps to help understand the transition process better.
First step, is the day you stop working at the “Big Job.” This is the good-paying, high-stress career that has funded your savings. There comes a day when you want OUT of that situation.
Second step, is the day you stop working at any job. For many folks considering retirement today, there are a variety of “other” jobs that they take after the Big Job. Some are consulting gigs in their career field. Others are hobby jobs related to a passion. But, all of them bring in some money, and maybe some health insurance. These jobs can make a HUGE difference in the success of your long-term retirement.
Third step, is the day you decide to start spending some of your savings. Some of your retirement savings may have rules that dictate your options. For example, Social Security pays the maximum benefit at age 70, but you can take a reduced benefit as early as age 62. Many pensions pay at a different rate based on the date you begin. And, of course, your retirement savings in your IRAs will last longer, the later you begin to spend it.
Each family, should consider each of these three steps and decide when the right time is for each. Sometimes, all three happen at the same time. Other times not. An experienced, highly trained, fiduciary Certified Financial Planner™ professional can be a huge help in evaluating these options. If you would like to talk with me about planning the three stages of your retirement, I would LOVE to have that visit. Follow this LINK to find a time that’s good for you for us to talk.
A new poll of 2,002 U.S. adults ages 35-70 discovered the pandemic has had far-reaching effects on how employees are planning both their retirement and their retirement”—a new life stage serving as a transition period between full-time work and retirement.
The survey was conducted by OnePoll, the market research division of SWNS, and was commissioned by Human Interest, a provider of 401k and 403b plans. It highlighted critical ways that workers have changed their attitudes about retirement and found that 71% of Americans said the pandemic changed their target retirement age.
Roughly one in three said the pandemic had changed everything about their retirement decisions—how they save (31%), what they want to do (31%) and when they want to retire (29%). An even greater number said it had changed how they make health decisions (40%) and how they save for emergencies (42%).
More than nine out of 10 workers are open to switching fields or jobs prior to retirement.
Small and medium-sized business (SMB) employees were more affected by the pandemic than those working for large companies—72% of those working at organizations with 250 to 499 employees said they will retire later than planned, 35 points higher than those working at large companies (1,000 employees or more).
Even the idea that work stops in retirement seems to be in question. The survey found that the average person believes you can work up to 11 hours a week and still be considered retired. Sixty-nine percent believe retirement is a gradual change away from full-time paid work, rather than a complete stop or a full transition to leisure.
The research also showed major differences in how people are planning their transition to retirement.
Two-thirds (66%) of those who had a very difficult pandemic experience think the ideal time to begin pretirement is before age 50, while less than a quarter (24%) of those who had a neutral pandemic experience said the same.
Workers have a diverse set of reasons for transitioning into a new job or industry before retirement. Looking to earn money and make their savings last longer (40%) and wanting to do something impactful for their community (39%) are at the top of the list. The coming election may be top of mind for nearly a quarter (24%) of the respondents who said they want to run for office when they retire. Those who had a very difficult pandemic experience are even more politically engaged -- 34% said they would want to run for office.
Mobility is a key desire for those planning retirement. Only 21% said they would stay where they are currently living. The rest are split between moving to another city in the same state (31%), moving to a different state (25%), becoming nomadic (10%), and moving to another country (11%).
The survey split respondents by how they would describe their pandemic experience on a five-point scale, from “very easy” to “very difficult.” It found that 71% of those who had a “very difficult” time (659 respondents) now plan to retire later in life.
Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.