Easing into Retirement

Posted by MoneyThinker in featured, goals | 1 comment

You should start thinking about retirement as early as you can. Now, I won’t harass you about it, that would be the pot calling the kettle black. But, it’s something that everyone should start thinking about, no matter how old you are.

Due to the bad economy, retirement has become a very scary thing for older adults. Money is hard to come by, their accounts may not have matured as much as they wanted to. A lot of people are still working a part time job even after they retire. It’s sad to see,  because those same people may have worked hard their whole lives and deserve a break.

So, what can be done about this? How can you or your loved ones get that retirement that is so greatly deserved? One technique that people have started to use is called phased retirement.

In short, people will take their retirement in phases. Here’s an example of what it looks like.

Alternative one. At 65, when most people retire, the first phase of phased retirement starts. People who have been planning for retirement in this way will usually leave their current career for a part time job. They can start to collect their IRA’s and other retirement funds if they wish, but they don’t have to touch their social security yet.  This allows retirees to start getting used to having a reduced income and having to live off of it without totally dipping into their retirement funding.

Alternative two. Another alternative that people suggest is for soon-to-be retirees to continue working full time for awhile. Then, at age 65, stop putting funds in your retirement account. Don’t take anything out. Then, take that money that you would be depositing and use it for fun stuff that you’d be doing in retirement. Travel on the weekends, go out to dinner, get stuff and have a movie night in with some friends. Do stuff that you enjoy, and get used to spending that tiny bit for entertainment. It helps you to get adjusted to the smaller budget while still enjoying everything that retirees get to do on a small scale.

Financial advisers then recommend that these phases end around age 70. This is when you become eligible for full social security benefits without restrictions and/or fees. With the economy the way that it is, this seems like a great option for people who are nearing retirement age to be able to persue their retirement dreams without breaking the bank.

One mistake that many advisers also point out is that people don’t save enough for retirement. If you are in your 20′s or 30′s now, you’re going to have to save twice to three times as much as this current generation has to in order to get through retirement. Are you planning for that?

This process can seem daunting. It can also feel disappointing to those who have that dream of early retirement. But, if you plan things out and save ahead, you too can enjoy that dream retirement… it just may be a little different than the American Dream. Until tomorrow, spend smart, save smart!