Don't Plan on Working Longer to Make Up for Small Retirement Savings

Here's a piece from Kiplinger's that bills itself as the late bloomer's guide to saving. In other words, if you're behind on your retirement savings, this article has some suggestions for how to make up the difference. Overall, it's a pretty weak piece (not very many great ideas here), but it does discuss the notion of "working longer" as a way to make up for retirement savings shortfalls -- an idea that many people seem to be planning on. While the author says that this method will certainly help, it's not certain that it's even an option for many of us:

But basing your retirement plans on working longer could be a gamble. “The big assumption is that both you and the job market for seniors will be healthy,” says Rande Spiegelman, vice-president of financial planning for Charles Schwab. A more prudent course is to cut spending now and boost savings while you can, rather than being forced to do so later. Otherwise, says Spiegelman, “it could be like going from driving a BMW to riding the bus.”

Here's what I suggest:

1. Estimate your retirement number now and start saving for it immediately. Act as if you'll need to quit working at 65. And if you don't have to and want to work longer, consider that a bonus.

2. If you're behind on your savings now, there aren't many choices other than to cut spending and increase income -- and put the new-found money into retirement savings. Here are some ideas for making more money (plus some more here) and here are some on how to save more money.

For more on retirement savings, see these links:

• How Much You Should Be Saving

• How to Maximize Your Retirement Savings

• Will You Be Able to Work in "Retirement?"

Comments

[Randy]

Do you recommend seeking higher paying work just to have the cash for savings?

I'm 32 and in a high paying job at the highest paying employer in my city but I am considering a career change. To date, I've done a decent job of saving for retirement and emergency fund.

Should I stay only for money? I'm not too far away from my "prime earning years". If I make a mistake in a C.C., it could have detrimental effects later in my retirement.

[FMF]

Randy --

That's a tough question and impossible for me to answer without knowing your complete financial picture. All I can say is that your career is a balance between earning money and enjoying yourself. If you're making a ton of money but hating every minute of it, it probably isn't worth it. If you love your job completely but have to take handouts to survive, it probably isn't worth it. The trick is to find that middle area that best fits your personal money/fulfillment ratio.

[Minimum Wage]

And if you're making minimum wage and hating every minute of it, it definitely isn't worth it!