Retirement Planning an Easier Way

family walks along a long dock on a lake with the blog title: Retirement Planning an Easier Way

There’s good news on retirement planning, whether you’re early in your career or further along.

We discussed an easier way to plan for your retirement on The BIGG Success Show today. Here’s a summary of that discussion.

This show was inspired by a study on the power of retiring later, published by the National Bureau of Economic Research.

Which of these two options sounds harder to you…

(1) saving 1% more every year for 30 years, or

(2) postponing your retirement by 4 months

The two of us agreed that Option 1 sounds harder. Yet the researchers found the two options deliver similar results.

How can this be?

In part because this study  on retirement planning focuses on the vast majority of people, NOT the super-rich. With this group, Social Security is a bigger driver. So, delaying the need for Social Security yields a greater benefit for the rest of your life.

NOTE: You could retire as planned, but defer signing up for Social Security, and the results would be similar.

What does this mean for younger workers?

First, don’t use this as an excuse for not saving. After all, you have time on your side now. If you understand the Rule of 72, you know that every dollar you invest now will double every 12 years (assuming a 6% return). $1,000 will turn into $2,000 in 12 years, $4,000 in 24 years, and $8,000 in 36 years.

But you only live once. You want to experience more while you can, before obligation weigh you down, before you’re no longer physically able to do it.

While you may not be able to have it all – there always will be trade-offs after all – this study shows you may be able to do more of what you enjoy now without sacrificing too much later.

What does it mean for people late in their career?

Are you in the twilight of your career? Do you ever get depressed reading articles where some financial planner is telling you how far behind you are in your retirement planning? Do you feel like your situation is hopeless?

This study relieves the pressure somewhat. Need to catch up on saving for retirement? Just plan on retiring a little later.

See! That wasn’t so hard.

The potential financial downside to working longer

We would be remiss if we didn’t warn you that this strategy is not without its risk. Research shows that about 1 out of 2 people retire earlier than planned.

1 out of 4 of those who retire early do so because they can afford it. What a wonderful reason to be able to fast forward to your golden years!

However, the remainder – 3 out of 4 – retire involuntarily, because of health issues or issues with their employer.

Retirement contingency planning

How can you plan for poor health or an unexpected layoff? In other words, how do I plan for the unplanned?

Have a Plan B (and C and D). For example:

(1) Maintain a low standard-of-living and invest more

If you in college, you may be maintaining a lifestyle we all hope to never live again. If you can keep living at that level, for a while, after you graduate, you can ramp up your savings and get money working for you.

(2) Invest more as you earn more

You may get a side gig and invest your income from it or you may bank a large share of the raises you get.

(3) Invest in alternative assets

Rich people don’t just invest in stocks and bonds. They also invest in alternative assets, like businesses and real estate. You can do the same to ramp up your retirement planning.

Contingency plans like these help insure that you reach BIGG success!

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