The allure of early retirement might start to sound appealing after a tough stint at the office. This is especially true as the years wear on. After the kids leave the nest, or grandchildren are born, it's natural to reassess your priorities. Working those 40 or 60-hour weeks may start to seem less fulfilling, when you notice there are still so many things you’d like to pursue apart from the workaday grind.
From 2020 to 2021, as COVID-19 swept the world, around 4.2 million people decided to retire according to Senior Economist Miguel Faria-e-Castro at the Federal Reserve Bank of St. Louis. This rush to the rocking chair increased the population of retirees in America from 18.3% to 19.4%.
If you’ve been thinking about retiring early—but you’re not supremely confident about the state of your finances—don’t! According to Boston University Economics Professor Laurence K. Kotlikoff, author of “Money Magic,” retiring early is actually one of the biggest mistakes someone can make.
According to Kotlikoff, a vast majority of people underestimate how much they need to put aside to retire and live comfortably on.
Let’s face it, most of us don’t hit it big with the lottery or amass enough of a small fortune to make early retirement a viable option.
When thinking about the optimal time to retire, you should try to calculate your maximum longevity.
According to the Centers for Disease Control and Prevention, the average American lifespan is growing. It is wholly possible that a person can outlive their savings. Given the added possibility that many of us may live to see 100, it stands to reason that we’ll probably need more money to retire.
According to a 2021 Gallup Poll, the most common retirement age is 62—the minimum age to start collecting Social Security. So, when planning for retirement, consider that you might have up to 40 years ahead of you to live independently.
How do you prepare to live until 100?
Kotlikoff recommends waiting until the age of 70 to retire. At 70, Social Security benefits max out. The age-70 Social Security benefit is 76% higher than the age-62 benefit.
Alas, many Americans believe they will retire in debt. To avoid such an outcome, begin aggressively planning for your retirement now. Always err on the side of caution and remember more is better. If you save more now, you’ll reap the benefits that come from having more time and financial security.