So many retirements are thrown off the rails these days that it's difficult for millions of Americans to say "I know I will definitely retire this year." They often give themselves a range of dates.
Let's face it. Retirement isn't what it used to be when you could put in 30 years and walk away with a defined-benefit pension that guaranteed monthly payments. Most Americans will be handed a lump sum from their 401(k) -- and it won't be enough to live on.
According to a new paper by The Center for Retirement Research at Boston College, "It’s nice to think we’re in control of when we retire. But this research shows that events get in the way of our best-laid plans."
Here are the major reasons why workers had to change their retirement plans, according to the study:
-- Workers in poor initial health and workers who experience worsening health prior to their planned retirement date are significantly more likely to retire early than others.
-- Those with retiree health insurance are slightly more likely to respond to health shocks by retiring early.
-- Those who are laid off, workers whose spouse retires before their planned retirement date, and workers whose parents move into their home are also significantly more likely to retire early than others.
-- Job-to-job mobility makes workers more likely to reach their retirement plans, but only if the new job is less stressful, requires fewer hours, or is higher paid than the old one.Health is the most important driver of early retirement, followed by layoffs or business closings, and then familial factors. Changes in finances play at most a small role.
The best way to avoid these retirement pitfalls is through planning. There are a number of things you can do:
1) Unless you can wait until age 65 to apply for Medicare, retiring before that date can be costly if you have to pay for your own health care. Check out what premiums for the least-expensive policies -- usually "bronze" or "catastrophic" plans -- cost through the Affordable Care Act.
While you may not find any bargains, keep in mind the higher the out of pocket (or "deductible"), the lower the premium.
2) To stay in the workforce, update your skills. What does it take to stay current in your field? What kind of education do you need to get a job outside of your current industry?
3) If married or living with a partner, talk about how they may be able to cover household bills while you get more education or look for another job. Remember that the longer you wait to leave the workforce, the more you can save.
4) Always do the math on estimated Social Security benefits. You can estimate your benefits at this site. Remember that the longer you wait beyond age 62 -- when you can first qualify for benefits -- the higher your payments. The government will give you an 8% annual raise in monthly benefits each year you wait beyond age 66 (until age 70).
Of course, poor health is always a game changer. You may not be able to work longer. In that case, carefully review your health insurance options.
