Phil Ventura’s plans for a cozy retirement were shot when
the company where he worked for 30 years merged with another and left him
unemployed at age 58.
Ventura, now 71, discovered what many younger people should
know if they are counting on working into their late 60s to make up for a lack
of retirement savings: “People are dreaming if they think they’re going to work
until they drop,” he said.
Yet, that is the plan for a lot baby boomers. Worried about
deficient retirement savings and unaware that job troubles or poor health end
up forcing people to retire early, 79 percent of workers are expecting to work
during their retirement years, according to a recent survey by the Employee
Benefit Research Institute.
But there is a huge disconnect between the plan to work and
what happens. Although most people now say they want to work into their
retirement years, only 29 percent of current retirees are actually doing it.
Half retired before 62, according to the EBRI survey.
If you are trying to figure out your options, here is what
you need to consider:
Will
there be a job for you?
“People lose jobs through no fault of their own,” said Jack
VanDerhei, research director of EBRI.
His research shows that 55 percent of people who retired
earlier than planned were forced to do so because they or their spouse
developed health problems. Healthy spouses must sometimes leave jobs to become
caregivers.
Further, even people able and willing to work long into
retirement may not be welcomed by employers. About 60 percent of those who lose
their jobs end up retiring involuntarily because they cannot get replacement
jobs, according to the Center for Retirement Research at Boston College
research.
Are
you saving enough?
If you are setting your savings goal based on working until
a certain age, get more conservative about your planning.
About half of people are not going to have enough saved to
keep up their lifestyle when they retire, and that assumes they keep working
and saving during the years all the way until 65, according the Center for
Retirement Research.
You need to first run a calculation to see if you are on
target to retire by 65 by using the “ballpark estimate” at a website like
choosetosave.org. Then, do another calculation to see if you will be in the
ballpark if you retire early – maybe 60 or 55 - by your own choice or not.
If not, increase your savings. It might seem like a burden
to cut spending now, but losing your job and being short of savings, will be
worse.
Remember
healthcare costs
Financial planner Brett Anderson, of Hudson, Wisconsin, has
had clients save large sums and plan to retire in their 50s, only to realize
healthcare costs would derail them before they became eligible for Medicare at
age 65.
It was a huge strain when Phil Ventura had to pay $15,000 a
year for health coverage for himself and his wife between 58 and 65, after he
lost his job as an administrator for a machine tool company.
Ventura had to dip deep into his retirement savings to
cover basic living expenses, and also took a minimum wage job with no benefits
stocking shelves at a grocery store. When he could go on Medicare, it was such
a financial relief, even though Medicare has costs also (reut.rs/2JhzrAR). “ I felt like I had died
and gone to heaven,” Ventura said.
Realize
the snowball effect
Ventura figures he would have had $500,000 more for
retirement if he had been able to work as he planned before the layoff. His
wife Anne has calculated they will run out of their savings by age 81.
The problems built on one another: They dipped into savings
instead of letting their assets grow, and they could not add new savings
because of the low earnings of Ventura’s minimum-wage job. Because he had to
take Social Security at 62, instead of his full retirement age of 66 or his
maximum benefit at 70, the benefit was much less.
“People don’t like to think about this when young,” said
Ventura. “But cycles happen and people are not immortal.”
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