Sunday Morning Quick Hits # 8: Saving More and Spending Less Should "Trump" Plans to Delay
No .. this isn't an article about the Donald. But for better or worse the word "Trump" does seem to get our attention these days. Rather, this Blog is about one of my favorite phrases: "It's not what you make, it's what you keep". Saving more and spending less should trump other priorities in all of our financial plans.
However, whether it is to remain active or to overcome retirement savings shortfalls, many people, including clients we work with at TruNorth Capital, plan to delay retirement past the traditional retirement age of 65.
Generally, I think we should delay retirement for as long as possible. However, despite best laid plans, recent research[i] published by the Pension Research Council shows that plans to work longer are often derailed for several reasons beyond the control of the potential retiree.
The study concluded that nearly half of the retirees surveyed had to leave the workforce earlier than planned due to health or disability, employer downsizing or closures, or having to care for a family member.
Current saving and consumption decisions must do more to plan for the possibility of health uncertainties, unemployment, volatility in investment returns, and the cost of retiring with debt, namely a mortgage payment that may continue into retirement.
While delaying retirement, if desirable to you, and is an option available at the time, it should be less of a factor in your financial planning considerations than your current savings rate and spending habits. A general theme of smarter overall financial planning is to save more, spend less and invest better; and this research supports the need for all of us to do more to embrace those core concepts first – before relying upon “working longer” to be a key part of your retirement income strategies. The option to work more for nearly half of us just isn’t viable.
[i] “The Changing Nature of Retirement,” published by the Pension Research Council, Julia Coronado from Graham Capital Management, L.P.