By Eric Reich
As a financial planner who specializes in retirement, I spend my days carefully planning out nearly every detail of a client’s future retirement. To clients, the most top-of-mind part of that plan is the actual date they want to retire. This is their focal point which they base many of their plans around. The problem is when something happens that causes that planned date to change. When it does change, it often doesn’t change for positive reasons. Factors to consider include:
- Health
This is the most common cause of a change in planned retirement date. A decline in health can shorten your total retirement years. The best way to combat this is to retire earlier.
There are a host of issues with being forced to retire earlier than planned. The inability to continue to save as much for your retirement is likely the biggest issue. Early retirement stops the combination of contributions to retirement as well as the ability to let your assets compound. This combined effect can cause you to have far less investment savings than you originally planned, causing you to have to spend less during your overall retirement.
- Forced Retirement
Those who work for someone other than themselves are sometimes at the mercy of that employer keeping them around until their planned retirement date. Time and again we hear stories about layoffs occurring in order for companies to save money. When they happen, they don’t typically happen to the youngest, cheapest workers. They happen to older, higher-paid workers since the goal, after all, is to potentially save as much as possible. While it is rarely the smartest strategy, it is likely to be the one that saves the most money. Older workers who are forced out of their jobs typically find that they have the hardest time finding a new job due to their age and salary requirements. While many ultimately find some type of work, the prospect of “starting over” commonly does not appeal to them and they simply decide to retire early instead.
- Changing your Goals
Life events such as becoming new grandparents or having a child move away can cause pre-retirees to change their overall goals. Retiring early to help a child care for their kids is a common reason for early unplanned retirement. Children and grandchildren moving away can also hasten retirement. Many retirees feel that the extra free time in retirement is wasted if not spent being more present in their family’s lives. If that family relocates, then some retirees want to follow along with them. This can ultimately change your planned retirement date.
The point of retirement is for it to be enjoyable. If it isn’t, then why bother retiring at all? While we may live a long time in retirement compared to previous generations, the reality is that not all of those years are going to be equal. I often tell clients that the first 10 years of retirement are likely to be the most impactful. Those are the years when you will likely be as active and capable as possible. After that, the chances of diminishing health increase. You might not be physically able to do everything you can now. The goal, therefore, is to focus on the overall retirement and not just the date you plan for it to begin.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
