There are obvious advantages to working past the typical retirement age of 65.
First, in many people’s minds, is money. Making an income and continuing to save while not drawing down your nest egg can have a big financial impact, especially if you’re trying to catch up.
Second, if you enjoy your work, it can keep you energized and mentally engaged. A good job can continue to give your life needed structure.
Third, some of your best friendships can be with your coworkers. These relationships are more difficult to maintain when you retire.
But there can also be a major downside to planning on working past retirement age. For many people it doesn’t pan out as expected. Gallup found that, in 2022, people’s average expected retirement age was 66. But the actual age of retirement averaged 62.1
Additionally, a recent survey by the Employee Benefit Research Institute (EBRI) found that almost half of retirees reported leaving the workforce earlier than they planned.
David Blanchett, a certified financial planner and head of retirement research at PGIM, says that while working longer can have a “dramatic” positive financial effect, it often doesn’t work out as planned. His research found that those who target a retirement date past 61 end up making it only about half as far as expected. For example, someone who plans to work eight more years (to age 69) will usually end up working only half that (to age 65).
So, what’s causing people to retire sooner than they intended?
According to EBRI, among people who said they retired earlier than planned, 35% did so because of a hardship like a health problem or disability. Another 31% said it was due to changes at their company.
Unfortunately, when an involuntary job separation happens late in your career, it’s difficult to find a new position at the same salary. Richard Johnson, a senior fellow at the Urban Institute think tank, found that among people who lose their job in their 50s, 90% are forced to take a position that pays less. “Often substantially less,” writes Johnson.
The point is not to be pessimistic or fearful about the years leading up to retirement, but to be realistic. Life is full of unforeseen changes and often these can derail plans to continue working indefinitely. Knowing this, it’s smart to take a critical look at your career prospects, especially if you hope to work through your 60s.
Your options may include planning for a career change, transitioning to a part-time role, or retiring earlier than expected. Your trusted financial advisor will be happy to assist you in thinking through what you should do under various scenarios, and how to plan
for the financial impact.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020
Sources:
1. http://go.pardot.com/e/91522/ot-a-good-retirement-plan-html/94tzx6/2243503478/h/j4sWVB_mwcX3yvnTOt71CiZb72JcG1m7PrVEThQHz6I
Disclosure: This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is a Financial Advisor in Utah. He is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment management and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Effective Investor Newsletter. Cities served in Utah are: Salt Lake City, Salt Lake County, Utah County, Park City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.
