Early Retirement Isn’t Always Voluntary, But Here’s How You Can Prepare for Such an Eventuality
Those long office hours stress you out, don’t they? And in as much as you may be committed to your job, you must have thought about retirement. Wouldn’t it be great if you were able to retire early?
Most employees dream about early retirement, but the truth is that not many of them actualize it. Ask any retiree, and they’ll tell you that financial responsibilities kept them working probably till they were 70.
All the same, a NerdWallet recent survey challenges the long-held belief that 65 is the age when most people retire. As they found out, current retirees hang up their boots aged 59 on average.
Of the participants in the study, 36% admitted to having had their hands tied when it came to their retirement. Job loss accounted for the retirement of 9% of the study group, while health complications forced 18% of them to go home.
When you think of early retirement, you always think that it’ll be voluntary, no? But as this survey shows, you may be forced into it, and that could be a setback instead of a blessing.
Forced retirement may leave you without an income if you had nothing going on elsewhere as a side hustle of sorts, and it may be worse if you hadn’t saved for it. That, coupled with the fact that retirement benefits don’t start coming till you’re like 67 may just be your worst nightmare.
Fortunately, there’s a way you can avoid this, and it all comes down to saving for retirement, but with the mindset that you may be home sooner than the traditional age.
To break it down, let’s take this 25-year-old whose pre-tax income is $40,000 with $10,000 in savings. This young lad envisions a long life, say living till he’s 95.
With a return of 6% as the assumption, NerdWallet calculates that to retire at 67, he’ll have to save $483 every month. However, going by the age that most people are retiring at nowadays (59), the eight-year difference translates to monthly savings worth $883. See? It almost doubles up!
Feeling the Pinch
For an older individual, say a 35-year-old, they’ll most definitely feel the pinch as they are much closer to the retirement age. For one who expects to live long and whose pre-tax income is $80,000 with $87,000 in savings, NerdWallet would have them save $1,267 per month if they are to retire at 67.
To retire eight years earlier, he’ll need to put aside a bit more. $2,767 per month will cut is, as per calculations by NerdWallet.
Although saving like your plan is to retire early may strain your paycheck to some degree, experts agree that it’ll be better for you in the long run. The best thing is that the money is still yours and you’ll have access to it later. For now, just cover your bases in case life takes an unexpected turn.
When it comes to these savings, by the way, those in their 20s are the luckiest. They have many years ahead of them, and this means putting away a smaller amount every month. Don’t wait till you’re in your mid-30s to start thinking about retirement. The time is now.
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