If you share these concerns and believe you don’t have enough money to retire anytime soon, you’re probably considering ways to work longer. And conventional financial advice would certainly focus on expanding your nest egg and prolonging your career.
However, here are three reasons you may want to consider retiring even if you think you’re falling short.
Many people never spend the money they saved
There’s some evidence that retirees actually spend less than they anticipated once they leave the workforce.
Research by economists David Blanchett and Michael Finke found that a typical retired couple withdrew an average of just 2.1% per year. That’s far short of the widely cited 4% rule that most retirees and financial experts use as a starting point. That said, William Bengen, the creator of the 4% rule, thinks you can now safely withdraw more if needed – up to 5.5%.
The general rate of spending less than expected in retirement suggests traditional financial advice may be too conservative for some households. In some cases, retirees may be able to sustain a comfortable lifestyle with much less of a nest egg than they initially thought. And don’t forget about your other income sources, including Social Security and any pensions you may be entitled to.
Of course, everyone’s situation is different, and your location or lifestyle needs may warrant a bigger budget and larger nest egg. Some people plan to live very simply in retirement, while others may be looking for a yacht and caviar lifestyle. But consider whether the tradeoff you’re making by working a few more years and boosting savings is worth the effort for you. If not, consider taking the leap early.
You can make moves to lower your expenses in retirement
There’s a good chance your retirement plan and “magic number” are based on a lifestyle that is familiar to you and your family. But you may not be considering all of the ways you can lower your expenses in retirement, especially if you are fine with forgoing an extremely lavish lifestyle.
Downsizing, for instance, could help you unlock some of the equity that would have been otherwise trapped in your home. Similarly, moving to another state could reduce your tax burden and cost of living enough to lower your required savings target.
Moving to another country could be a serious game changer. Relocating to expat havens including Malaysia, Vietnam and Indonesia can slash your expenses, including health care, by a very meaningful amount. Retiring in Europe or Latin America can also be more affordable than in the U.S. At the same time, your quality of life may be better.
