Shoot for the Moon

I love the saying, “Shoot for the moon. Even if you miss, you’ll land among the stars.” I would much rather underestimate what it takes to get me where I am going, and over acheive, than end up falling short. That is the philosophy I am taking toward planning for retirement.

On average, men stop working at age 64 and women at 62.  According to the employee Benefit Research Institute, nearly half of all retirees end up leaving work earlier than they had planned, often because of layoffs or illness. Only a third exit the workforce early because they can afford to.

To retire early would mean some serious belt-tightening…more than just putting aside the money saved by taking your lunch to work or making your own coffee at home. For most, retiring early would mean living far below your means…putting 30% or more of your income into retirement accounts.

The natural tendency for most is to increase your spending over time. As your income grows…you tend to spend more. If half of each pay increase is automatically diverted to savings, you slow that tendency, and save more aggressively without feeling deprived.

Another strategy to NOT work any longer than you have to, is to put as much as you can each year into a tax deferred savings accounts such as 401(k)s and Roth IRAs. If you are making money on the side, you can also take advantage of a SEP-IRA to save some of that income as well. If you have a qualifying high-deductible health plan, consider pushing money into a Health Savings Account.

For me, the cost of health insurance is what gives me cause to pause…that and the fact that I love working (and spending). What are your thoughts and strategies about retiring or retiring early?

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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