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Funding your retirement lifestyle

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For many of us, working during retirement is not part of our retirement plans. While working may provide a little extra income, in general, Americans have it set in their minds that their retirement years are best reserved for rest and relaxation. In fact, a recent Guardian Life poll discovered more than 60 percent of Americans do not plan on working during their retirement years.

While not working is clearly the preferred way to live our retirement years, for many Americans it just isn’t a possibility. The cost of living continues to be on the rise, and many Americans put off saving for retirement until it’s too late, forcing them to take on a part-time job as a source of supplemental income.

Yes, you can get Social Security retirement benefits and work at the same time. However, if you are younger than the full retirement age for Social Security purposes, and make more than the yearly earnings limit, your benefit will be reduced.

Let’s take a look into some trends to gain a better understanding of how Americans can avoid working during retirement, and how you can help clients create a retirement savings plan to fund the lifestyle they want when they stop working.

Retirement landscape

The majority of Americans in any age range are not considering working during their retirement. Survey respondents ages 18 – 24 lead the way, with nearly three-quarters of respondents from this group saying they are not considering working during their retirement.

Furthermore, the income level of the poll respondents seemed to have very little impact on whether or not they are considering working during their retirement. Even among respondents with the lowest income level surveyed ($0 – $24,999 annually), more than half of the respondents declared they were not considering working during their retirement years. Surprisingly, respondents at the two highest income levels indicated they are the most likely to continue working during their retirement years.

Regardless of intentions, the most likely way to avoid working during retirement years and still live the comfortable, worry-free life most of us look forward to, is to have a personal retirement plan in place that will cover major retirement risks, like health care costs, living longer (longevity risk) and inflation risk, for example.

The real cost of retirement

Your retirement savings will have a meaningful impact on whether or not you are forced to return to work during your retirement years. Without a proper retirement savings plan in place, it is more likely that your living expenses during retirement will prove to be difficult to handle and end up stressing your finances, forcing you to perhaps make some difficult choices.

Many Americans simply aren’t aware of how expensive a comfortable retirement lifestyle can be. For many of us, retirement is viewed as a time to reward ourselves for all of our hard work over the years, taking the time to plan vacations, explore new passions and create memories that will last a lifetime. However, many of these goals will be difficult to achieve without proper financial planning for retirement.

Estimating the true cost of your retirement is no easy task, but retirement planning calculators and other financial resources for retirement can help explain retirement savings needs. When creating a retirement savings plan, keep in mind the hidden costs of retirement, including the potential need for long-term health care, taxes, home and car upkeep, and daily spending.

Maximize retirement savings and start saving early

While young people may feel that it’s way too early for them to start saving for their retirement, the truth is the 20s and 30s are actually the best time to start a retirement savings plan. The earlier you start saving for retirement, the more time is on your side which can lead to big dividends as you approach retirement age.

When you start saving for retirement earlier in life, your savings have the potential to compound and lead to even more retirement savings. Any amount of money you are able to contribute to a retirement savings plan will help to build your retirement portfolio. Additionally, if applicable, try to make the most out of your employer’s matching contribution to your 401(k) retirement savings plan.

In the event you switch your job, you should consider all available alternatives (such as keeping your assets in your former employer’s 401(k) plan, rolling your savings to your new employer’s plan or rolling the assets to an IRA) rather than cash out your 401(k). If you cash out your retirement savings, in addition to incurring potential tax consequences, you will interrupt your potential for compound returns.

It’s never too late to create a retirement savings plan

If you are a bit older, it’s important to remember that it is never too late to start saving for your retirement. While it is true that saving earlier will help you get the most out of your retirement savings, anyone at any age stands to benefit by creating their own retirement savings plan. Regardless of your age, there are many retirement financial planning tools and resources that can help you understand how much you will need to live comfortably in your retirement years.

If you find yourself behind on your recommended retirement savings plan and are looking for ways to make up the difference in your retirement income gap, you should consider the possibility of working during your retirement years. Nowadays, more and more retired seniors are getting part-time jobs to help supplement their retirement income and give them a little extra financial security.

Working during your retirement doesn’t have to be a burden either. In fact, many seniors look for jobs that give them an opportunity to explore and try out new and different interests. In research we conducted, we learned 38 percent of small-business owners envision a retirement that includes periods of going back to work. Furthermore, having a part-time job during retirement can help you stay busy and active within your community and give you something to do with a portion of your new-found free time.

No matter what your age, income level, or future plans may hold for you, making sure you have the proper retirement savings plan in place is crucial if you are hoping to make the most out of your retirement years.

See also:

3 retirement planning tips for couples after Valentine’s Day

Confidence in retirement readiness? What’s that?

4 new (and surprising) facts about retirement security

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