How to Avoid Working One More Year

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Hundred dollar bills with the words retire young.
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By David Ning

Should you quit now or work another year? This is the question that plagues many soon-to-be retirees. In fact, there's even a term for those suffering from this condition: The work one more year syndrome. Some people who have adequate resources are afraid to retire, fearing that their nest egg won't last through a 30-year retirement. Here are some suggestions for people who have enough money to retire, but feel compelled to stay in the workforce for another year:

Have a clear understanding of the 4 percent rule, and create a plan based on accurate knowledge. Retirees generally understand that a sustainable withdrawal percentage is 4 percent annually, but not everyone knows all the intricacies behind this rule of thumb. In order for you to gain more confidence that your portfolio will survive, you need to have a clear understanding of the original study by William Bengen (pdf) and how future changes will affect your assumptions. You should know the asset allocation used, the assumptions made and how the numbers are calculated so you can think for yourself whenever a new published study challenges the numbers.

Build reasonable cushions into the plan. Another year of work means a bigger nest egg, but there are also other ways to increase your chances of retirement success. You could develop a detailed budget and identify areas where you could cut spending if market performance doesn't go your way. Your personal inflation rate is also somewhat controllable, and it could be smaller than standard inflation. There are many ways to conservatively plan for retirement, and working longer is just one of them.


Consider adding income that doesn't take much work. Many people with the work-one-more-year mentality think retirement means completely stopping all active income generating activities, but retirement can also mean making a bit of income on the side. For example, perhaps you could invest in physical real estate. Being a landlord is certainly hard work, but it also gives you an additional source of retirement income that generally keeps up with inflation. You could also turn a hobby into a small income-generating venture. There are lots of ways to make more money, and the income generated doesn't have to be huge to improve your retirement finances. Even just a few thousand dollars a year will mean a sizable decrease in how much you need to draw from your nest egg each year.

Being flexible with withdrawals will greatly increase the likelihood that you can retire sooner. The 4 percent rule assumes a retiree will start off withdrawing a fixed amount and increase withdrawals by inflation even if the market tanks. In reality, I doubt anyone who actually runs the numbers will do this. You can drastically improve your chances of never depleting your nest egg just by suspending the inflation increase whenever the markets don't cooperate. The good news is that this is usually easily accomplished because you can probably cut out some parts of your budget temporarily without a noticeable sacrifice in comfort.

Be optimistic about your future. Future returns may not be as bright as they were in the past, but your portfolio will do fine unless the year you retire is during a significant financial downturn and you aren't flexible with your spending. And even if this unfortunate series of events happens, you can always just find another job.

There is no way to know for sure if your nest egg will last your lifetime. But if you take a few precautions, you won't have to spend your retirement years worrying about running out of money. Familiarize yourself with a few strategies that will help you to weather unforeseen events. And then when you hit your retirement savings goal, go ahead and quit your job if you still want to.

Visit MoneyNing.com for more personal finance discussions. This site also helps readers decide whether a zero-percent balance transfer card is worth signing up for and keeps a good list of helpful promotion codes.


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willim_care

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December 04 2013 at 1:28 AM Report abuse rate up rate down Reply
MR NUSSBAUM

WHAT PORTFOLIO?

August 10 2013 at 3:46 AM Report abuse rate up rate down Reply
laedbac1

The propaganda about working longer because people are living longer is just that. Propaganda. Big brother govornment would like everyone (except the democrats) to work till they drop. That way you never collect your own earned Social Security and can pay for the demorrats to sit on their behinds and collect off your work. What we have seen from our white house over the last 5 years and the cess pool of social welfare being handed out should be illegal. Not to mention the moral decay to our society. They create a problem in order to gain more govornment control. Watch your backs baby boomers. The govornment will use and abuse you. Vote wisely. God bless America. In God We Trust.

August 09 2013 at 4:32 AM Report abuse -2 rate up rate down Reply
1 reply to laedbac1's comment
Michele

g o v e r n m e n t

August 09 2013 at 5:37 AM Report abuse +1 rate up rate down Reply
kentusm

Thanks you for speaking up conservatives.. When I comment on the huffiee puffiee, I really get clobbered. But, I love pissing off libs... They just hate the truth.

August 08 2013 at 10:08 PM Report abuse +2 rate up rate down Reply
1 reply to kentusm's comment
Michele

You don't piss off libs. You only think you're pissing off libs.

In reality, we're not laughing with you, we're laughing at you.

August 09 2013 at 5:38 AM Report abuse +1 rate up rate down Reply
welcome butch

VOTE FOR ODUMMER EVERYTHINGS FREE

August 08 2013 at 9:02 PM Report abuse rate up rate down Reply
betty_brock

Become a Dem and go on welfare.

August 08 2013 at 9:01 PM Report abuse +3 rate up rate down Reply
RMS

The article suggests becoming a landlord to add to your income. Problem with that is you have to have the "extra" funds to purchase the income property. Then, you have to hope you have good tenants that don't destroy the place, that pay their rent on time, and that you don't go very long without a tenant when one moves out. Being a landlord can quickly become an expensive proposition, with little or no return. You have to keep up the property, repairs, etc. and lastly, rental income is taxable income. Keep all this in mind before deciding if you really want to be a landlord. A viable alternative to this would be to live in a primary residence that has an income producing apartment or 2 family home. It gives you a place to live, and rental income besides, assuming you don't mind "sharing" your home with tenants.

August 08 2013 at 8:32 PM Report abuse rate up rate down Reply
1 reply to RMS's comment
betty_brock

Rentals are way too much of a headache. If you can't do most of the upkeep yourself, you will pay out most of the rent in repairs.

August 08 2013 at 9:13 PM Report abuse rate up rate down Reply
pdbliz

AMERICA,,,sept 1,2013,,,,,,,all walk off your jobs,,,stop paying house payments,,,stop paying on all credit cards.......
IF THE DEMOCRATES WANT US TO BE DEPENDENT ON THEM ,,,SO BE IT,,,,
WE WILL ALL GET ON GOVERMENT HELP...........NO PROBLEM,,,,'
I see that jobs really do not matter to the Democrates,,,,,,THEY RATHER YOU NOT WORK,!!!
HOW SAD THE DEMOCRATES ARE DESTROYING LIVES OF PEOPLE IN THE FORM OF WELFARE.!!! ARE,,IS IT CALLED,,,,,VOTE FOR ME FOR BENIFITS.????

August 08 2013 at 5:11 PM Report abuse +4 rate up rate down Reply