Two important keys to retirement security
Are you worried what retirement is going to look like? Wondering if you'll be better off than your parents?
If you’re over age 50 and concerned about the future, consider making two changes that could significantly improve your odds of retiring, says Charles Farrell, author of Your Money Ratios: 8 Simple Tools for Financial Security.
If you combine working a little longer with some modest reductions in your retirement lifestyle, you can vastly improve your retirement picture, he suggests.
Working a few more years. First, consider how much of an impact working five more years could have on your retirement. Farrell assumes you’re 65 and have $1,000,000 in total retirement assets but cutting that number in half, excluding government pensions might be a more realistic target for many. Eiother way, the math is the same.
If you could earn 5% a year on those funds, your retirement plan would be worth about $1,275,000 at age 70, or about 28% more than at age 65, he calculates. That means it could support almost 28% more in distributions.
Plus, assuming you could save $15,000 a year for each of those extra years. The additional savings helps boost the plan balance to $1,360,000, or about 36% more than at age 65.
Cut back a little bit. If you can reduce your retirement lifestyle expectations by 15%, you’ll need a corresponding 15% less in savings to meet your goals.
A good rule of thumb for producing distributions in retirement is that every $5,000 worth of distributions will require about $100,000 of assets at age 70. If you reduce your lifestyle needs by $15,000 that means you need $300,000 less in assets to support your retirement.
It really comes down to how important it is for you not to continue to work. If that 15% reduction provides you with the freedom to retire, it may well be worth it.
When you combine the 36% boost in retirement assets by working five more years with the 15% reduction in lifestyle expenses, you’ve got a swing of 50% in your retirement preparedness.
That’s a huge change, and can make all the difference between an unrealistic goal and an achievable goal, Farrell maintains.
While earning more and spending less is hardly a revolutionary idea, is this how you expect your future to play out?
By Gordon Powers, MSN Money
* Follow Gordon on Twitter here.
Posted by: Craig | May 31, 2021 10:12:02 AM
who wants to work to 65 much less 70?
Posted by: Gordon | May 31, 2021 11:25:00 AM
Having a million dollars and still worrying about retirement security?
Work more and spend less, my ten-year-old boy already knows that rule to save.
Posted by: Huh? | May 31, 2021 12:25:08 PM
Work to 70? Just in time to fall apart and start becoming best friends with your doctor and pharmacist? Great idea. Not only that, think of the extra unemployment among younger workers just because all these old guys are too afraid of leaving the work force. Seriously, who needs over a million dollars when they are 70 unless you think it's necessary to pass on wealth to your children or you are living in a mansion and paying huge property taxes and if that's the case SELL and RENT. And what possible expensive hobbies can you have at 70 that would require so much money? Skiing in the Swiss Alps? I don't think so. Traveling around the world? At 70? Even if you are in great health at that age you'd only be doing that once at most. Only workaholics want to retire at 70, and most of them kick it shortly after anyways.
Posted by: What??? | May 31, 2021 4:44:19 PM
You people that want to retire at 60 must be young....When you are 65 you are thinking to yourself...so if I retire what do I do with my time. I can go on a few holidays...golf a few times during the week. But the people I know spend all morning reading the paper, then go to the gym then try to figire out what to have for supper. If you don't have a hobby that takes up a bunch of time then to work until your 70 sounds pretty good. In our case we own our own company and don't pay unemployment. People are living much longer than in the past so you have to figure out what to do for about 15 years. Sitting around gets pretty old.
Posted by: joe | May 31, 2021 5:04:23 PM
Assuming most will have assets at least in excess of 1,000,000 is a little optimistic in this cuurent economy...
Posted by: Malcolm | May 31, 2021 11:12:18 PM
5% return? Wish I could find a mutual fund that had returned 5% PA over the last 5 years. Minus 5% seems to be closer to the truth with most so called"" professionally"managed funds.
Posted by: GenXer | Jun 1, 2021 8:51:04 AM
I agree with the majority of the comments - who wants to work until 70, definitely not me. I am targeting 62 and i have 21 years to get there. I am focused on a comfortable retirement and I also want to enjoy the freedom of deciding what i want to do with my days. I may find i want to consult when i retire from my full-time role, but time will tell if that is what i want to do. I will be happy to enjoy the family cottage, travel to florida, enjoy my gardens, spend time with my kids/grand kids etc. I also want to do a lot of volunteering and a ton of reading so i will have no issues filling my time. As someone said, you don't know how good your health is going to be so it makes sense to retire while you still have lots of vitality and hopefully decent health.
Posted by: SID | Jun 1, 2021 12:21:40 PM
OVER.. OVER PAID, JUST HAND TICKETS AND SIT AT A DONUT SHOP FOR $40 +++ AN HOUR!!!
Posted by: Jacob | Jun 5, 2021 9:33:38 AM
@Malcolm.. I agree. That is why I abandoned mutual funds long ago. I have a financial advisorthat I trust, and who buys and sells stocks for me and also gets me into partnerships. I have done very well, even in bad times, like in 2008. When I had mutual funds, I was always losing.
Posted by: Jacob | Jun 5, 2021 9:47:43 AM
I have read the comments on retirement with much interest. I am now 51 and have 2 years to go until I can retire with full company pension, which will be more than enough for me to llve on, so there would be no need for me to continue working. I don't count on CP. I originally thought that I would walk away from my work for good after retirement, but at this point, I no longer think so. Again, not because I need the money, but because I love my work. The key difference in working after retirement is having the teflon shoulders. I can chose when to work, how long I work, and what projects I work on. No worries about job security. Work (at least my work) then becomes a hobby. If I chose to go away for a few years, then I will do it. If I get bored, I can always go back to work on contract for a short stint. I have 5 colleagues that had retired many years ago, only to turn up back at the office the day after their retirement party and they are still working to this day. I have 2 others that have never worked since retirement.
Posted by: Jan | Jul 27, 2021 5:40:08 AM
We worked hard all our lives. Raised our family. Love our grandchildren. We always put off till tomarrow. Thinking we would enjoy our retirment. We made plans, dreams, places and things we wanted to. I am 50 my husband now 51. He has taken ill this year. Dr. do not understand what is wrong. Boy dose this make you realize. Putting off was not such a good plan. We might get to see the places we dreamed of. But might not get do things like climb that big hill to see the view.
Go diving. Or skiing. The point is working till your 65 in hopes you are still able to do things you could have done at 30. Not going to happen. We age perty guickly. If working is the only thing that we have. That is so sad. There is no time on my Death bed I will have wanted to work one more day. But i might regret spending time with my family. Not seeing some place i always dreamed of. They are the only things that matter in the end. You can not take it with you. And at 80 and up you can stay at home read the papper. Take a nap. You do not need alot of $ to do that. So retirer early, enjoy what time you have of good health. Make that bucket list and follow through. There will be time to relax later. Or time might run out for one of you.