As we approach year end, it may be that you’re thinking about contributing more than you already have to your 401K or IRA. If you’re not, perhaps you should be. Maxing out your contributions, or even contributing an extra few hundred dollars if you can spare it can make huge strides in your retirement savings over time. The younger you are, the more you should try to contribute, because your money will have even longer to accrue interest, grow, and be the kind of “nest egg” you’ll need to ensure your retirement is happy, healthy, and everything you dreamed of.
Recently USA Today told us all, at this year end time, to “Beware of these 7 retirement myths.” There is great information in the entire article about stocks vs. bonds, Medicare, and Social Security. But the most important myth, for me, was the last one.
MYTH NO. 7: You’ll can make up a savings shortfall by retiring later or working part-time.
That’s a hope or last resort, not a plan. It’s unwise to rely on future circumstances for your 60s or beyond. Forty percent of retirees surveyed by consulting firm McKinsey & Co. said they were forced to stop working earlier than they had planned, for health reasons, having to care for a spouse or family member, or because of a layoff.
Even a job loss well before retirement age can be tough to recover from.
People age 55 and over currently spend an average of more than 13 months on unemployment, according to the AARP Public Policy Institute — nearly five months longer than younger job-seekers. So don’t take it for granted you’ll be able to make up for years of failing to save enough by working on the back end of your life.
I’m entirely guilty of subscribing to this myth or notion. I tell myself, “I’ll never retire. I’ll just cut back or work fewer hours, but I can’t ever see myself just done working.” The brutal truth, though, is that this isn’t always a choice. Sometimes retirement is forced, sometimes careers are stalled just when you get to the good parts. It doesn’t give any of us, myself included, the free pass to stall just because we’re betting money we’ll die at our desks!
So this December, make your retirement savings a priority. Cut back on some gift giving and holiday dining, and throw at least a few of those extra dollars in retirement. Your 65 (or 85) year old self will thank you!