Postpone Retirement for Your Health

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Postpone Retirement for Your Health

The American Association of Individual Investors printed an article in their June, 2013 Journal entitled “Postpone Retirement for Your Health” which read in part:

What [Sahlgren] found is that not only does retirement adversely affect health, the number of years spent in retirement also impacts health. Specifically, he found that being retired led to:

  • A 39% reduction in the likelihood of describing one’s health as “very good” or “excellent,”
  • A 41% increase in the probability of suffering from clinical depression and
  • A 63% increase in the probability of having at least one diagnosed physical condition.

Doubling the number of years spent in retirement:

  • Decreased the likelihood of being in “very good” or “excellent” health by 11%,
  • Increased the probability of suffering from clinical depression by 17% and
  • Increased the probability of having at least one diagnosed physical condition by 22%.

The most important statistic in the article was:

This new research backs up a study we discussed last year. University of Zurich researchers estimated a decrease of 1.8 months in lifespan for each year a person retires early. (See “Early Retirement, Early Death?” in the Briefly Noted section of the June 2012 AAII Journal.) Though several factors determine when to retire, we will point out that there is a financial benefit to waiting: more salaried years and fewer years of relying on savings.

These statistics back up some of the wisdom contained in our articles on retirement. Here are 17 principles for thinking about retirement and the articles which support them:

  1. Focus on what is in your control. What is in your control will have a much greater effect on your retirement than what is not in your control.
  2. Get a taxable investment account, a 401(k), and a Roth. Get a plan.
  3. Plan on living an long and prosperous life. Planning on dying young or even average is not a retirement plan.
  4. Every 6-10 years you delay saving and investing you cut in half the lifestyle you will have in retirement. You owe it to yourself and your family to know how much money you should be investing each year.
  5. Get your 401(k) match and don’t buy an annuity. Know what financial advice to take and what advice to ignore.
  6. Don’t retire. You were made for significant work in your life.
  7. Don’t retire. You will be bored unless you have significant work.
  8. Do take advantage of exploring your other skills and interests. It is unlikely that your paid work exercises all of your talents.
  9. Don’t neglect health, your bucket list, or an active lifestyle. Do avoid drug addiction, depression, and losing the meaning of life from your work.
  10. Better to stop saving and start spending a little than to retire completely. Work helps a successful retirement.
  11. Don’t make the mistake of thinking you can just live off the income from your portfolio. Rather than being safe it spends too much and jeopardizes your retirement.
  12. Know what your maximum safe withdrawal rate is for your age. Not spending more than your safe withdrawal rate is how to ensure you still have money at age 100.
  13. Know your safe withdrawal rate. The chances are that you’re either spending too much or could spend more.
  14. You should recompute your retirement projections every couple of years. You should recompute it every year if the markets have sharply correctly.
  15. There is an optimum amount to bonds. The remainder should be invested in stocks to keep up with inflation.
  16. Women’s need retirement projections the most. Their longevity is more likely to challenge a retirement plan.
  17. Women are sometimes tempted to spend more early in retirement. But they are the ones who will need money late in retirement.

For more wisdom, consider seeking the guidance of a fee-only financial planner.

Follow David John Marotta:

President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.