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Never retire? Don’t count on it

It can be dangerous to believe that you can overcome a retirement income shortfall by telling yourself that you will work past the traditional retirement age or never retire at all.
 Charles Sims Jr.

by Charles Sims Jr. CFP

If there is anyone who shouldn’t have to worry about retirement, one might assume it would be a wealthy person. But in a recent survey, just 40 percent of wealthy individuals “completely agree” that they are “totally confident” they will have enough money for retirement.

And the rest?

Apparently, most of them have decided they aren’t going to worry about it: 60 percent said they will shun traditional retirement and work as long as possible. The percentage rises to 70 percent among those ages 45 and younger.

Of course, there’s nothing wrong with wanting to work for your whole life. Work can be a source of satisfaction and other benefits. It’s been shown that people who work later in life may be less likely to suffer cognitive decline than people who retire early. And for people concerned about their finances, working longer may make sense: The amount of time to accumulate money increases, while the duration of retirement decreases.

But it can be dangerous to believe that you can overcome a retirement income shortfall by telling yourself that you will work past the traditional retirement age or never retire at all. Here’s why.

Since 1991, the median retirement age has remained at or near 62. The percentage of workers who expect to retire after age 65 has tripled over the past two decades — from 11 percent in 1991 to 33 percent in 2010. But the ages at which most people retire haven’t changed as dramatically. In 1991, 79 percent of retirees left the workforce before age 65; in 2010, it was 61 percent.

Many are forced to retire

In 2010, 41 percent of retirees stopped working earlier than they expected to. This is not unusual. Since 2000, the percentage of people who retired earlier than planned in a given year has varied between 36 percent and 51 percent. Certainly, some people (24 percent) retire early because they can afford to, but just 5 percent gave only positive reasons for doing so.

The most common reasons for retiring ahead of schedule were poor health (54 percent), work-related reasons including downsizing and closure (37 percent), and the need to care for a spouse or family member (19 percent).

Working in retirement not as common as you might think

In 2010, 70 percent of workers were expecting to work for pay in retirement. Despite this high level of determination, only 23 percent of retirees were actually working.

Believing that you will work forever or retire late in life could lull you into a false sense of security. You may be tempted to save less and spend more today because there is no urgent need to prepare for tomorrow. But if something unfortunate happens – or you change your mind when you get older – you could find yourself retired anyway, possibly with less money than you need.

There’s nothing wrong with ignoring tradition and choosing a life path that keeps you always engaged and challenged. But recognizing that you may not always be able to work and earn an income might help you make decisions that keep more of your options open.

(Charles Sims Jr., CFP, is President/ CEO of The Sims Financial Group. The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.)

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