When would you like to retire? You may already have a certain age in mind, but it might be a good idea to view your retirement date as more of a moving target, since changes in your life can affect your thinking — and your financial strategy.
Here’s a timely example: Because of the COVID-19 pandemic and its effect on employment, 35% of Americans say they are now planning to retire later, according to an Edward Jones/Age Wave study titled Four Pillars of the New Retirement: What a Difference a Year Makes. The same study found that more than 60% of retirees wish they had done a better job of planning for the financial aspects of retirement.
Of course, the pandemic is (hopefully) a once-in-a-lifetime occurrence, but any number of smaller-scale events could also affect your retirement date. For example, if you get a new, higher-paying job, you should be able to increase the amount of money you put away for retirement — which, in turn, could allow you to retire earlier than you had once planned. On the other hand, if you lose a job and you’re out of work for a while, you may be forced to delay your retirement.
Your retirement lifestyle goals could change, too. Instead of saying “goodbye” to all forms of work, as you once thought you’d do, you might discover that you could make a reasonable amount of money as a consultant — and if that’s the case, why shouldn’t you retire earlier than you’d anticipated?
Here’s the key point: By planning ahead, you can give yourself the flexibility to respond to whatever changes come your way.
What are some of these moves? Consider these suggestions:
While you’re still working, try to put in as much as you can afford to your 401(k) or other employer-sponsored retirement plan, and increase your contributions when your salary goes up. Within these accounts, devote a reasonable amount of your dollars to growth-oriented investments.
If you decide to retire earlier than you had thought, you may need to modify your risk level somewhat by investing more conservatively in the last few years before your new retirement date, but for most of the time you’re contributing to a 401(k), you really want to strive for as much growth as possible, within your risk tolerance.
If you retire sooner than you had planned, voluntarily or not, you don’t want to be saddled with a heavy debt load. So, while you’re still working, try to follow a budget and oversee your cash flow in a way that allows you to avoid incurring heavy debts.
Consistently contributing to your 401(k) and managing your debt load are important parts of your overall financial strategy, but you’ll want to review that strategy periodically, possibly with the help of a financial adviser, to make sure it’s still appropriate for your goals. Deciding to retire earlier or later will certainly affect this strategy, but so will other factors, such as your children’s education goals, your life partner’s income, your tax situation and your estate plans.
Preparation and flexibility: They’re two keys to helping you successfully reach your retirement date — whenever it occurs.
This article was written for use by Edward Jones financial advisors. Edward Jones and its associates and financial advisors do not provide tax or legal advice. Chuck Smallwood, Bret Hooper, Tina DeWitt, Kevin Brubeck, Charlie Wick and Jeremy Lepore are financial advisors with Edward Jones Investments and can be reached in Edwards at 970-926-1728, in Eagle at 970-328-0361, 970-328-0639 or 970-328-4959 and in Avon at 970-688-5420.