One of the main reasons we plan so carefully for retirement is that we can't wait to get there. But before you get carried away and get in a hurry to retire, stop and think carefully about whether you've really saved enough money to quit working. In today's competitive workplace, it could be difficult to go back to work if you find yourself needing more income after retirement.
One way to provide a more comfortable retirement, and prevent financial difficulties after you stop working, may be to postpone retirement by five more years. That idea may not appeal to you at first, but consider the effects five more years of savings could have upon your retirement income.
1. After you turn 50, you can make additional catch up contributions to your IRA, 401(k), or other retirement plan. Beginning in 2015, you can contribute an addition $6,000 to your retirement account each year. In five years you'll have saved an extra $30,000, plus interest, more for retirement. Remember, that's in addition to your regular tax-deferred contributions, which can reach $18,000 per year beginning in 2015.
2. With years of experience under your belt, you're probably at the peak of your career now. This is a great time to pay down your debts, so that you can enter retirement free of high-interest credit card bills.
3. Over the course of five years, the funds in your retirement account could accumulate considerable interest. As your capital grows, this will further boost your eventual retirement income.
4. No one likes to think about the end of their retirement years, but it's something we can't avoid. When you work for five more years, you also shorten your retirement by five years. You'll be less likely to outlive your money and run into needing additional income at the end of your life.
Delaying retirement may not be the right plan for everyone. But when you consider the positive impact it could have upon your retirement savings, it's easy to see why some people decide to work just a few more years.
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