The first generation whose pensions were replaced with 401(k)s discovers what happens when you hit retirement age in a bear market: you can’t retire.
Americans are changing the game plan for retirement, with millions laboring right past the traditional retirement age and working into their late 60s and beyond.
While the average retirement age remains 63, that standard may soon be going the way of the gold watch — a trend expected to accelerate as baby boomers close in on retirement without sufficient savings…
Working longer is generally the best option for those who come up short on retirement savings. And with many people’s investment portfolios and 401(k)s down significantly in recent months, it has become a compelling alternative for many retirees or near-retirees to having to live on less.
“It’s always been a good idea, but right now it can be an especially good idea,” said Christine Fahlund, a senior financial planner with T. Rowe Price. “You really don’t want to be pulling more money out of a portfolio that’s already down.”
Putting off retirement also may enable people to delay when they start taking Social Security benefits, which can significantly increase payments.
“The longer the delay, the better” financially, said Fahlund. “To me the ideal would be 70, because you get the biggest Social Security benefit possible and all those additional years of employment. And it keeps you going mentally and physically too.”
Got that? Going to work every day at age 68 or 69 is great, because it “keeps you going mentally and physically”.
At least Social Security hasn’t gotten thrown into the stock market. Yet.
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Comments (2)
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There are three things to be learned from this:
1. Teach your children how to pursue a career that will allow them to work fruitfully for over sixty years. This is a departure from teaching them about finances because, over that period of time, they will have had the opportunity to fail at whatever risky undertaking they endeavor to undertake three to four more times than we did growing up. For most of us, one failure after forty, such as a divorce or serious disability will have set the tone for our retirement almost as much failing to save enough.
2. It would be out-of-character for me not to suggest you still stress the benefits of saving early on (which is still a good idea even if the new early-on is forty) but instead to outline the necessity to stay healthy - you will need this to be able to work that long.
3. In reference to the stock market, the truth is, with that kind of potential longevity, I am beginning to tell folks that these target dated mutual funds and any other financial tool that promises to grow your money more conservatively as you age be reconsidered. It is true that pensions, which I refer to as the great "economic stabilizer" for the remaining 21% of the nation that still has them, are what more of us should have. But on the other hand, the stock market losses that people are feeling may not yet have completely wiped out all of the gains you may have. Consider this: Just ten-years ago, the S&P 500 index opened in January 1998 at 980.28 and even with the devastating markets that have occurred in the meantime and down from a high of 1517, that index is still up 20%. That may not be great money but it is still pretty good. And if you continue to invest evenly and consistently, which a 401(k) allows you to effortlessly do, you will, I firmly believe, still be okay. I just wish I could say you wouldn't have to work - at least a little.
Posted by Paul Petillo on September 5, 2008 at 10:20 AM
Posted on September 5, 2008 at 10:20 AM
There are three things to be learned from this:
1. Teach your children how to pursue a career that will allow them to work fruitfully for over sixty years. This is a departure from teaching them about finances because, over that period of time, they will have had the opportunity to fail at whatever risky undertaking they endeavor to undertake three to four more times than we did growing up. For most of us, one failure after forty, such as a divorce or serious disability will have set the tone for our retirement almost as much failing to save enough.
2. It would be out-of-character for me not to suggest you still stress the benefits of saving early on (which is still a good idea even if the new early-on is forty) but instead to outline the necessity to stay healthy - you will need this to be able to work that long.
3. In reference to the stock market, the truth is, with that kind of potential longevity, I am beginning to tell folks that these target dated mutual funds and any other financial tool that promises to grow your money more conservatively as you age be reconsidered. It is true that pensions, which I refer to as the great "economic stabilizer" for the remaining 21% of the nation that still has them, are what more of us should have. But on the other hand, the stock market losses that people are feeling may not yet have completely wiped out all of the gains you may have. Consider this: Just ten-years ago, the S&P 500 index opened in January 1998 at 980.28 and even with the devastating markets that have occurred in the meantime and down from a high of 1517, that index is still up 20%. That may not be great money but it is still pretty good. And if you continue to invest evenly and consistently, which a 401(k) allows you to effortlessly do, you will, I firmly believe, still be okay. I just wish I could say you wouldn't have to work - at least a little.
Posted by Paul Petillo on September 5, 2008 at 10:26 AM
Posted on September 5, 2008 at 10:26 AM