Who retired early, who retired late: How early saving makes it a choice
3 questions financial planners and workers looking ahead to retirement need answered.
Although 65 remains a common target age for retirement, a new survey by MoneyRates.com found that many people are retiring younger or working longer, either by choice or necessity.
The survey addressed several questions on the minds of both financial planners and workers looking ahead to retirement.
Who has reached early retirement?
Slightly more than one in five of those surveyed who are younger than age 65 already have retired, and another 8 percent in this age group are semiretired.
Combined, nearly 30 percent of respondents from ages 45 to 64 already have been able to quit working completely or cut down to working part time.
Some have been able to retire even younger. More than 10 percent of those from age 45 to 54 are retired, and another 7 percent are semiretired.
How many Americans are working past retirement age?
On the other side of the coin, the survey found that 16 percent of respondents are still working full or part time after age 65.
Although the study notes that some of them choose to continue working because they enjoy it, one goal of retirement planning should be to make how long you work a matter of choice.
That means having enough saved to support a comfortable retirement by age 65, whether choosing to start using the money then or not.
How does early retirement savings relate to early retirement? A deciding factor in who retires early seems to be when people started saving for retirement. It makes sense that early savings would improve the likelihood of early retirement, and the survey backs this up.
Roughly two-thirds of those who have been able to retire or semi-retire before age 65 started saving for retirement by age 40.
This includes 35 percent of people who were able to retire or semi-retire early because they started to save by age 30. In contrast, those who are still working at age 65 and beyond are less likely to have gotten an early start on retirement saving.
The survey found that only 18 percent of those still working past retirement age started saving by age 30. This is less than half the number of early retirees who started saving that early.
Why does saving early make early retirement possible?
The survey cites two general reasons. Early savings spreads the burden, and it unleashes the power of compounding investment returns.
“Whether you started early or not, planning for retirement is a big task — and you can’t afford to waste time or money along the way,” the report’s author concluded. “That’s why it’s important to take control of your finances and learn how to build wealth. You can do it yourself or work with a financial advisor to help you develop your strategy.”
The MoneyRates site has the complete report, “Early Savings Pays off in Early Retirement.”
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