When do you want to retire? You may already have a certain age in mind, but it might be a good idea to view your retirement date as a moving target, as changes in your life can affect your thinking and financial strategy.
Here’s a timely example: Due to the COVID-19 pandemic and its effects on jobs, 35% of Americans say they now plan to retire later, according to an Edward Jones / Age Wave study titled Four Pillars of the New Retirement: What a Year Makes the Difference. The same study found that over 60% of retirees wish they had better planned the financial aspects of retirement.
Of course, the pandemic is (hopefully) a one-time event, but there are a number of smaller-scale events that could affect your retirement date as well. For example, if you get a new, higher paying job, you should be able to increase the amount of money you set aside for retirement, which, in turn, could allow you to retire earlier than expected. On the other hand, if you lose a job and are unemployed for a period of time, you may have to delay your retirement.
Your retirement lifestyle goals could also change. Instead of saying ‘goodbye’ to all forms of work, as you once thought you would, you might find that you could make a reasonable amount of money as a consultant – and if so, why Shouldn’t you be retiring sooner than you planned?
Here’s the key point: By planning ahead, you can give yourself the flexibility to respond to any changes that come your way.
What are some of these movements? Consider these suggestions:
Make the most of your retirement accounts. While you’re still working, try to put as much as possible into your 401 (k) or other employer-sponsored pension plan, and increase your contributions as your pay goes up. In these accounts, spend a reasonable amount of your dollars on growth-oriented investments. If you decide to retire earlier than planned, you may need to change your risk level somewhat by investing more conservatively in the last few years before your new retirement date, but most of the time you are contributing. at a 401 (k), you really want to strive to grow as much as possible, within your tolerance for risk.
Keep your debts low. If you are retiring sooner than you planned, whether on purpose or not, you don’t want to be faced with heavy debt. So while you are still working, try to keep a budget and monitor your cash flow so that you don’t get into heavy debt.
Review your financial strategy. Consistently contributing to your 401 (k) and managing your debt are important parts of your overall financial strategy, but you’ll want to review this strategy periodically, possibly with the help of a financial advisor, to make sure it’s still appropriate. for your purposes. Deciding to retire sooner or later will certainly affect this strategy, but other factors as well, such as your children’s educational goals, your life partner’s income, your tax situation and your plans. inheritance.
Preparation and flexibility: these are two keys to helping you reach your retirement date successfully, at all times.
This article was written by Edward Jones for the local financial advisor to Edward Jones.