By DENNIS GRUBAUGH
All around me, people are dropping like flies from the workforce.
I first noticed it five years ago when I was on the committee for our 40th high school reunion. Several classmates had already retired. A few years later, I’m on the same committee and planning the 45th — and even more of my peers have entered the post-work afterlife.
The pressure is all around me: The people I have known for a lifetime are choosing to quit early and do things their own way. I wonder if they’re making the right choice. My heart is with them, but my mind says no.
Every expert says that the longer you can delay retirement, the better your financial position. For me that’s a good thing — I have no desire to retire.
Of course, there are plenty of reasons to retire that have nothing to do with searching for a beach or more time with the grandkids. Ill health is one of them. Then, there are those who “get retired” by a company bent on downsizing and getting rid of older employees. Sometimes, offered buyouts are pretty good, and sometimes they’re lousy. And they seldom happen when somebody truly wants to retire.
One mistake made by many older people is to quit a job without a real safety net, perhaps to go looking for another job. Finding no options, some people then retire out of frustration.
Like most people my age, I read AARP’s monthly magazine and always stop on the retirement-wealth stories. I keep looking for a sentence that says, “If you have (fill in the blank) number of dollars, you can retire as of (fill in the blank).” Unfortunately, I have yet to find it, although there are any number of wealth calculators on line that can help you with the goal.
The real answer is as unique as each individual’s circumstances, and in every instance, the more money you amass during your high-earnings years, the longer you can exist during the last, lean ones. Those people who make a ton of money in their lives are more equipped to retire early. Those who just get by during their younger years are going to find themselves doing exactly the same thing upon retirement — unless they’ve built a nest egg.
A recent Associated Press story supports my theory that working beats retirement, at least in the financial sense.
Gallup Poll data shows retirement starting at the average age of 61. The Centers for Disease Control says a person who has lived to his early 60s will last on average 23.3 more years. That means somebody like me, 62 years of age, can expect to be around until I’m 85. However, I’m not assuming anything — I’ll still look both ways before crossing the street.
The Bureau of Labor Statistics estimates the expenses you’ll face when you retire. Older households (defined as ones headed by someone 65 or older) will spend $46,000 annually, compared to the $57,000 average spent by all U.S. households combined. The top monthly expenses for those 65 and older are housing ($1,322), health care ($500) and food ($484).
The Bureau says that, on average, about half of a retired household’s income comes from Social Security and pensions. Personal savings and investment and rental income provide another 6.9 percent.
The average 401(k) balance for those in the 60-69 age bracket is $198,000, according to research by NerdWallet, an American personal finance website. If you’re short of those numbers, then you’re below average.
I said everyone’s case is different. If you still have a big mortgage or college expenses, you’re better off paying them down before you ever step off that retirement cliff. And, if you play the stock market, make sure you’ve got a portfolio that reflects a strategy tailored to your age. The older you get, the less aggressive you want to be.
Because society is living longer the likelihood grows, too, that more of us are going to need long-term care. At that point savings can go fast – including the potential for loss of a home.
There are strategies to deal with all the possibilities I’ve mentioned here, and a good financial adviser can help you through all of it. The point is, put a plan in place long before you need it.
Maybe it’s my white hair, but people have been asking me for years if I’m retired, or if I’m going to retire. I’d be lying if I said I wasn’t thinking about it, but I don’t plan to go gently into that good night of newspapering.
I particularly like the advice of my neighbor who told me recently, “My back is telling me retirement, but my bank account says no.”
Dennis Grubaugh is editor and partner of the Illinois Business Journal. He can be reached at [email protected] or (618) 977-6865.
By DENNIS GRUBAUGH