But here are some of the risks of delaying those savings efforts:
First, Can you save enough if you wait until later? Clearly, it is easy to postpone savings. You know -- just wait until the children are grown before saving significant sums for retirement.
But waiting until your 40s or 50s to start saving can bring some challenges to your retirement savings success.
For instance, what happens if you’re diagnosed with a major medical condition? Or worse, you develop a major disability that means you’re out of work.
What about an unforeseen layoff, or the risk of death or divorce?
All these events could impact your savings strategies.
If there are two wage earners in the house there is additional risk. Loss of spousal income could compound your savings problem.
Married adults between the ages of 51 and 61 experiencing any major problems may be shortchanged on their savings efforts. These problems are further amplified if individuals had limited education.
The best ways to minimize these risks are:
- saving early – build cash reserves
- buy disability income insurance protection
- buy life insurance
- buy health insurance
- buy assisted living insurance
Working Longer – A Solution?
Delaying savings for retirement exposes you more to the impacts of job loss, divorce or other catastrophic events. Combining that risk with increasing longevity and fewer defined retirement income sources, and early personal savings becomes an increasingly important part of retirement safety.
However, personal savings rates have only recently increased, which means that up until just a few years ago, many people may have to discard traditional views of retiring at age 55, or even age 65.
The result is planning to work beyond age 55.
With improved health and less physical jobs, this may not be such a bad outcome. Delayed retirement means individuals will be able to save more. They would be getting larger benefits from Social Security and/or pension plans, savings would be tapped into later in life, allowing for more appreciation of the portfolio.
Let’s look at a simple example. Showing annual income after taxes and health insurance premiums for a typical male at age 70, retiring at various ages: If he retired at age 62, he could expect an annual net social income of $17,000.
At age 65 he’d get $22,920,
At age 67 he’d get 27,256,
At age 70 he’d get 34,790.
So, if you are planning for a deferred retirement, make sure you have adequate insurance, and try to manage a leaner household budget to make savings grow faster.
How much is enough when it comes to savings?
- It varies by individual
- Use household income budget for spending target
- Plan for a portfolio to generate 4-7 percent total return annually.
- don’t disburse more than portfolio earns
- Means must track performance
