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Will Your Retirement Dreams Be Delayed?

February 24, 2012 · 14 comments

in Personal Finance

When I first started working at the age of 23, retirement seemed like something that old people did.  I started contributing to a 401k plan with my first paycheck, but retirement seemed so far off that I didn’t put much thought into it.  I didn’t really have a goal of retiring early, I just figured my husband and I would retire at 65 like most people seemed to do.

I am now 21 years into my ‘career’ (working at the same darn job off and on all those years) and working until the age of 65 does not seem very appealing.  However, even though we have diligently saved for retirement each year, our portfolio has not experienced the typical returns that ‘experts’ say you should expect on average each year.

A recent article on Yahoo Finance discussed Five Expenses Keeping You From Retiring.  I went through these expenses and looked at how our personal situation would be affected.

  1. Stock Market Drop.  This obviously affected many people.  It hurt portfolios and people also lost jobs and experienced salary reductions/stagnation.  The stock market drop wasn’t all bad though.  It did allow us to buy stock at lower levels.
  2. Boomerang Kids.  This refers to kids leaving the nest, and then flying right back in due to unemployment or student loan debt.  My kids are still in high school, so this obviously does not apply to us.  However, the article did state that the average cost to raise a child to 18 is $226,920 (so glad that counted that extra twenty bucks) in the United States.  We have 3 kids, so obviously this expense affects our retirement.  Add what we pay for private school into the equation, and kids definitely play a huge role in how long we will have to work.  However, they are worth every penny we spend on them and more, even if it means I have to work until I am 95 years old.
  3. Divorce.  We are not divorced, and don’t ever plan to be.  However, I have seen how divorce can absolutely ruin the finances of couples that were previously very financially stable.
  4. Lifestyle Changes.  The article discusses changes such as taking on a new expensive hobby, or a experiencing a medical problem.   My hobby would definitely be travel, which I can see would be costly.  Being able to afford to travel will definitely add years onto our work life.  Regarding medical issues, life is unpredictable, so we just plan to try and save enough to help cover medical expenses.  It is very hard to know what that amount would be though.  On the flip side, our ‘lifestyle’ will change when our  kids are all done with college (they start rolling off the payroll when we are 48), and our house will be paid off around the same time.  So, assuming our kids don’t boomerang back, our expenses will drop considerably at that point.  This will allow us to save a lot more than we do now, and that money will be put toward ‘earlier’ retirement.
  5. Poor Planning.  We always planned to save for retirement, and we did.  We didn’t plan for poor stock market performance though, and we did end up traveling and spending on some things that we didn’t plan to spend on.  However, we found that spending the money while the kids were still home was worth delaying retirement somewhat, so no regrets there.  Not sure that falls under poor planning as much as just ‘living’ and learning what is important to you along the way.
I would also add the following to the list:
*Unrealistic expectations.  This might fall under ‘poor planning’, but I think some people expect a 12 percent annual return on their investments or possibly expect an inheritance to come through.  Also, younger people will have to consider the possibility that Social Security will no longer being solvent by the time they hit retirement age.  I recommend that everyone should plan to fully fund their own retirement and consider anything received from Social Security as an added bonus.
*Poor Investments.  I think this has greatly affected many people that invested  in real estate.  Those that put their retirement nest eggs into investment properties must really be hurting.  Real estate is just one example of a possible poor investment.  Some invested in businesses that didn’t work out, or were too heavily invested in one company that took a nosedive.   This is why diversification is so very important.
How about your retirement plans?  Did you have a target retirement age in mind when you started working?  Do you think you will retire sooner or later than what you thought?


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