What kind of retirement do you think you’ll have? An outstanding one? A depressing one? What if it all starts
with your outlook? Qualitatively speaking, what if the success or
failure of your retirement begins with your perception of retirement?
A whole field of study has emerged on the psychology of saving,
spending and investing: behavioral finance. Since retirement saving is a
behavior (and since other behaviors influence it), it is worth considering ways
to adjust behavior and presumptions to encourage a better retirement.
Delayed gratification or instant gratification? Many people close to retirement age would take the
latter over the former. Is that a good choice? Often, it isn’t. Financially
speaking, retiring earlier has its drawbacks and may lead you into the next
phase of your life with less income and savings.
If you don’t love what you do for a living, you may see only the
downside of working longer rather than the potential boost it could provide to
your retirement planning (i.e., claiming Social Security later, tapping
retirement account balances later and letting them compound more). If you see
work as a daily set of unfulfilling tasks and retirement as an endless
Saturday, Saturday will win out and your mindset will lead you to retire
earlier with less money.
On the other hand, if you change your outlook to associate working
longer with retiring more comfortably, you may leave work later with a bigger
retirement nest egg – and who wouldn’t want that?
If you don’t earmark 66 or 70 as your retirement year, you can become
that much more susceptible to retiring as soon as possible. You’re 62, you can
get Social Security; who cares if you get less money than you get at 66 or 70,
it’s available now!
Resist that temptation if you can. While some retirees claim Social
Security at age 62 out of necessity, others do out of inclination, perhaps not
realizing that inflation pressures and long term care costs may render that a
poor decision in the long run.
The good news is that Americans are waiting longer to claim Social
Security than they once did. Increased longevity may be a factor in that
trend, but the findings are encouraging nonetheless. The number of men claiming
Social Security at age 62 increased 2.3% from 2007-09 to 35.8%, and the number
of women claiming Social Security at age 62 increased 2.6% in that span to
38.9%. Still, these percentages fell short of those a generation before. From
1986-97, roughly half of all women claimed Social Security when they turned 62
and nearly half the men did; since 1997, the percentages have never approached
Setting a target age for retirement – say, 65, 66, or even 70 – before
you turn 60 can help mentally encourage you to keep working to that age. Providing
your health and employment hold up and you can work longer, patience can lead you
to have more Social Security income rather than less.
Take a step back from your own experience. For some perspective on what your retirement might be
like, consider the lives of others. You undoubtedly know some retirees; think
about how their retirements have gone. Who planned well and who didn’t? What
happened that was unexpected? Financial professionals and other consultants to
retirees can also share input, as they have seen numerous retirements unfold.
Reduce your debt. Rather than assume new consumer debts that advertisers encourage us to
take on commensurate with salary and career growth, pay down your debts as best
you can with the outlook that you are leaving yourself more money for the
future (or for unexpected situations).
Save and invest consistently. See if you can increase your savings rate en route to
retirement. Don’t look at it as stripping money out of your present. Look at
it as paying yourself first, and investing for the comfort of your retirement.
This material was prepared by MarketingPro,
Inc., and does not necessarily represent the views of the presenting party, nor
their affiliates. This information has been derived from sources believed to be
accurate. Please note – investing involves risk, and past performance is no
guarantee of future results. The publisher is not engaged in rendering legal,
accounting or other professional services. If assistance is needed, the reader
is advised to engage the services of a competent professional. This information
should not be construed as investment, tax or legal advice and may not be
relied on for the purpose of avoiding any Federal tax penalty. This is neither
a solicitation nor recommendation to purchase or sell any investment or
insurance product or service, and should not be relied upon as such. All
indices are unmanaged and are not illustrative of any particular investment.
1 – ssa.gov/retirementpolicy/research/early-claiming.html [4/13]
2 – fool.com/retirement/general/2014/06/07/social-security-what-percent-of-americans-claim-be.aspx