Retirement is a mixed bag! On one end of the spectrum, there are people who will have to continue to work out of necessity. They simply didn’t save enough money to call it quits in their 60s. Of course, there are a multitude of reasons why this may be the case. Others are staying in the workforce because they don’t want to go home and do nothing. Technically, though, retiring early is still a possibility. The numbers don’t lie, though; people need to start planning for this, maybe even 30 years, before they call it quits!
In 2016, almost 60% of those polled in a labor market survey said they expected to work past the age of 62. That number has fluctuated a bit over the last few years, but it’s mostly been on the decline. In that same survey this year, less than 45% of people expected to do the same. The drop in these numbers may come down to a better financial plan. Simply put, workers who want to retire early need to start putting enough money into their funds early in their careers.
People on Fidelity’s 401K plans that have the best returns have been part of the program for an average of 26 years. When they reach the age of 59, many of them are able to accumulate over one million dollars in their accounts. What’s the biggest difference between the people who are millionaires at that age and those who aren’t? It doesn’t necessarily just come down to having a higher income. Instead, these people have been religiously saving around 17% of their earnings over the last 26 years. Their employers were also able to contribute another 9%. The money that they’ve put into their accounts, plus the magic of compound interests, makes early retirement a possibility for these people.
Proper financial management is certainly the key to retiring early. Of course, putting the right amount of money into the account also helps. While some of the newer generations won’t necessarily have access to pensions, there are a few things that they may have going for them. People with no kids, for example, are increasing in number throughout society. The same thing goes for couples who both are part of the workforce. Without the responsibility of children, they may not only save up more money in their daily cost of living, but they’re also in a situation where unplanned expenses are less likely. This allows them to potentially invest more into their retirement accounts without having as much fear of potentially needing that money later on.
While pensions are out of the question for most of the new generations, there are arguably more investment options at their disposal. So much so that even entrepreneurs who decide to start saving for retirement early could potentially save up enough to exit the workforce prior to their 65th birthday. That’s even without the 9% that the average worker could get courtesy of their employer. The key is still to start saving up early and finding a financial vehicle that makes sense for each situation.
