Sunday, October 20, 2013

Sooner or Later?

On October 16, more than a hundred professionals gathered at the Fall 2013 ASEC Partners’ Meeting to discuss the obstacles to, and possible solutions for, retirement savings.  National Save for Retirement Week is upon us, and America Saves Week will be here before we know it. 

So too, retirement – which seems far away to many, and IS far away for some – often seems to be a far off goal, something that can wait for another day, a more “convenient” time, when we have more free time, and perhaps fewer financial demands.

Indeed, it’s easy, in the normal press of life, to put off thinking about retirement, much less thinking about saving for a period of life many can hardly imagine. We all know we should do it—but some figure that it will take more time and energy than they can afford just now, some assume the process will provide a depressing, perhaps even insurmountable target, and others  - well many don’t even know how to get started.

Here are six reasons why you—or those you care about—should save – and specifically save for retirement – now:

Because you don’t want to work forever.

No matter how much you love your job – or love your job today – that might not always be the case, and you might want the flexibility to make a change on your terms; if not to retire, to cut back on your hours, or maybe even to pursue other interests.  The sooner you’ve made those financial preparations, the sooner that decision can be your choice, rather than one forced upon you.

Because living in retirement isn’t free – and it might cost more than you think.

Many people assume that expenses will go down in retirement, and for some they may.  On the other hand, retirement often brings with it changes in how we spend, and on what – and that’s not necessarily less.  For example, research by the Employee Benefit Research Institute (EBRI) has found that health-related expenses are the second-largest component in the budget of older Americans, and a component that steadily increases with age.  Note also that long-term care (LTC) insurance is a growing area of concern for retirees and, according to government estimates, 12 million older Americans will need LTC by 2020. However, in most cases LTC is not covered by Medicare, and this care is expensive and can be indefinitely long or even permanent.

Because you may not be able to work as long as you think.

The Retirement Confidence Survey (RCS) has, over its 23 year history, consistently found that a large percentage of retirees leave the work force earlier than planned—47 percent in the 2013 RCS, in fact—and many retirees who retired earlier than planned cite negative reasons for doing so, including health problems or disabilities (55 percent); changes at their companies, such as downsizing or closure (20 percent); having to care for spouses or other family members (23 percent).

Some retirees do mention positive reasons for retiring early, such as being able to afford an earlier retirement (32 percent) or wanting to do something else (19 percent), but just 7 percent offer only positive reasons.

Because working longer may not be enough.

One of the more recent alternatives proposed is that of continuing to work longer which, if possible, would serve to both postpone the depletion of retirement income resources, and to provide additional time to save.  As noted above, this assumption might not prove to be a viable option for all, and even for those who can and do, EBRI research has found that even working until 70 by itself may not be sufficient for some individuals.

Because you don’t know how long you will live.

People are living longer and the longer your life, the longer your retirement could last, particularly if, as noted above, it begins sooner than you planned. Retiring at age 65 today? How big a chance do you want to take of outliving your money in old age?

Because the sooner you start, the easier it will be.

What are you waiting for? Sooner or later, you know you need to.  And the later you start, the harder it can be.

- Nevin E. Adams, JD

A good place to start – any time –  is the BallparkE$timate,® and with the other materials available at www.choosetosave.org, as well as www.americasavesweek.org.

For more information on retirement saving and spending, see also:
Income Composition, Income Trends, and Income Shortfalls of Older Households

How Does Household Income Change in the Ten Years Around Age 65?

Spending Adjustments Made By Older Americans to Save Money

Expenditure Patterns of Older Americans, 2001-2009

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