What If I’ve Failed To Plan For Retirement?
The most common retirement planning mistake is a sin of omission: often, people just don’t make a plan, perhaps because thinking about doing it is overwhelming. A recent Bankrate, Inc. poll showed that only 28 percent of respondents expect to be able to retire comfortably. In last year’s version of the poll, 44% of those polled indicated that they were saving 5% or less of their gross income for retirement. This year’s stock market collapse and depressed economy will be especially punishing to those close to retirement who were under-prepared.
The National Endowment for Financial Education has created a nice Late Saver’s Guidebook for those who may feel that they’ll just have to work until they die, either because they didn’t plan early or because the market drop or some other financial setback has impeded their ability to save (Warning: don’t click the guide link unless you have a fast connection; it’s a 16M .pdf file).
Planning to work past normal retirement age is only one of several things you can do if you find yourself in middle age with little or no retirement savings. Developing disciplined spending habits, learning how to invest wisely, and making optimum use of tax strategy are some of the ways that a late saver can avoid a failed retirement.
However, staying at work is worth considering if you’re close to retirement but have had your nest egg shrunk by recent market declines. If you can avoid drawing down your resources by continuing to work, you should do so; later on your health may not permit you to work. The ability to keep working is particularly valuable if your employer provides health insurance benefits.
The guidebook is a couple of years old, so a few of the tax-related specifics are dated. Still, it’s a good starting resource for those who have the feeling that it’s too late to save for retirement. Its recommendations could be especially valuable for some who were planning to retire soon but have seen their retirement savings drop significantly in the last year.
Boston College’s Center for Retirement Research recently released a brief that also bears on the problem of working past retirement age. Their research found that only about half of full-time workers aged 58 to 62 are still working for the employer they had at age 50. There’s evidence that many of these workers switched to jobs that were more enjoyable, but which provided less economic compensation that their prior job. Workers who are healthy in their sixties but are short of the savings needed to retire will probably need to pursue a combination of continued work and savings and reduced spending for as long as their health allows.