The layoffs, licenses, and volatile earnings from the pandemic make it easy to understand why one in five boomers is delaying retirement due to financial insecurity from COVID-19, according to a MetLife survey. But how do you explain this? Another survey, conducted by financial services research firm Hearts and Wallets, found that roughly one in six US breadwinners under the age of 55 (11.5 million) say they “aspire to retire at 55.” .
My “Friends Talk Money” podcast co-hosts and I talked about both trends in our latest episode. And we reached out to the “FIRE” movement, which stands for financially independent early retirement, to see how it has performed in the pandemic. We were surprised by what we learned. (You can download the episode wherever you get your podcasts.) Laura Varas, CEO and founder of Hearts and Wallets, told us this about “55 aspiring to retire”: “Some of them are well positioned. But many of them are not and would need help to achieve this goal. ” What People Aspiring To Retire Before Age 55 Are Doing But some of them have done, and are doing, some smart things to financially help make retirement at 55 at least possible, if not guaranteed. “They are much less likely to have high student debt,” Varas said. In addition, they “spend less on housing and utilities as a percentage of their spending” compared to groups that aspire to retire at older ages, he added. In the Hearts & Wallet survey, only 13% of “Aspire to Retire at 55” respondents have $ 50,000 or more in student loans compared to 29% of all breadwinners under the age of 55 who have yet to have retired. And while those under 55 years of age and who work, in general, spend 44% on housing and public services, the Aspire to Retire for 55 spends 39% on those. But “Friends Talk Money” co-host Pam Krueger, Money Track co-host on public television and founder of Wealthramp.com, questioned what she called the “math” part of aspiring to retire at 55. “At 55, In order to get rid of it all for the rest of your life, assuming you want to live on something like $ 60,000 a year, you will still need to have saved between $ 1 million or $ 1.5 million to $ 6 million at that point in order not to risk it. to run out of money, “Krueger said.” It’s a lot of money to aim for. “But, he added, it’s great if people under the age of 55 get” excited “about saving and investing sooner for this goal. money movement FIRE? Members of the FIRE movement are all about saving and investing intensively and diligently in order to be able to retire, if not 55, before the traditional retirement age of 65. You might think that the pandemic has stifled the FIRE movement , but that one is not s the case. according to Ted Carr. He hosts a podcast and blog called Later2Fire and lives near Phoenix with his wife; they are both 60 years old and retired. His focus is on people who joined the FIRE movement in their 50s or 60s. When asked if COVID-19 had extinguished the FIRE movement, he said: “I don’t see a lot of action on social media where people are throwing in the towel.” But, he added, the early days of the pandemic were “a wake-up call” for some young people in the FIRE movement because the stock market crashed and some people lost their jobs. See: Has COVID-19 Stopped Americans From Pursuing Early Retirement? Not exactly. “Anyone who thought they were going to retire in their 30s or 40s probably had a rude awakening,” Carr said. “The ones who fought the hardest are the ‘lean FIRE movement.’ Those are the millennials who planned to live the way. extremely frugal and save about $ 40,000 a year. “Unfortunately, economic disruptions tend to hit people at the lower end of the income spectrum more than people at the higher end,” Carr noted. people, I think, have probably had the biggest challenge accepting their plans being interrupted. “My other” Friends Talk Money “podcast co-host Terry Savage (syndicated personal finance columnist and author of” The Savage Truth on Money “) he had doubts about whether retiring at 55 or 60 is realistic these days. But, he said, “what I love about [the FIRE movement] it forces people to start thinking earlier about the tradeoffs between spending now and not having to work in the future. ” The ‘life is too short’ mentality on when to retire Approximately 12% of boomers surveyed by MetLife said the pandemic has accelerated when they retire. The reason given by about a third of them, said Roberta Rafaloff, vice president of institutional income annuities at MetLife, “life is too short.” Related: I am 60 years old and I lost my job due to COVID-19. My husband earns $ 150,000. We saved $ 1.3 million. Do I resign myself to early retirement? That sounds like the point of view of people who have seen too many people die from the coronavirus. Rafaloff said these boomers told MetLife: “I need to enjoy my retirement as soon as possible because you never know how short a life can be.” Savage responded on the podcast, “I think the pandemic has made us all feel deadly.” Krueger said he has heard many people in their 50s and 60s say they want to retire earlier than planned because they hate their jobs and are exhausted. She said they tell her: “Every day that I go to work my spirit hurts.” So they are determined to find a way to retire early, even if it means working part-time in retirement. One way to be realistic about your retirement date, Savage said, is to get an estimate of how long you could live. That way, you can outline how long your money will last. Life Expectancy and Social Security Claim She recommends the Life Expectancy Calculator on the Livingto100.com site, created by Dr. Thomas Perls, founding director of New England Centennial Study. You enter information about your family’s longevity, health and habits and get an estimate of your own mortality. (Savage Life Expectancy: 98.) Another useful tech tool: the new Removable app. It is a personalized digital plan for early retirees. You can get a free basic financial assessment or pay $ 99 a year for a financial plan with the advice of certified financial planners. One way to increase your financial security in retirement, Savage said, is to delay claiming Social Security until at least your full retirement age (between 66 and 67 these days) and even 70, if possible. This is because Social Security increases the size of your checks by 8% per year for each year it takes you to start claiming benefits between your full retirement age and age 70. One more tip, which I offered on the podcast: Starting this fall, employers with 401 (k) retirement plans will be required to tell their employees how much the money they have saved on them would mean in monthly income depending on when retire. Also read: I am financially independent at 33, now what? I think those lifetime income figures may come as a surprise to some people who expect their 401 (k) savings to generate more money in retirement than they actually will. It could lead some people to decide that they will need to retire later than planned, cut expenses more than planned, or continue to work part-time in retirement. According to the new Major Survey on Retirement Security, only 46% of workers said they were confident they had enough money saved to live comfortably in retirement (compared to 54% in early 2020). So that idea of aspiring to retire at 55? Aspire seems like the right word. Richard Eisenberg is the senior web editor for Next Avenue’s Money & Security and Work & Purpose channels and managing editor of the site. He is the author of How to Avoid a Midlife Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS Moneywatch. This article has been reprinted with permission from NextAvenue.org, © 2021 Twin Cities Public Television, Inc. All rights reserved. More from Next Avenue: