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Photo: N/A, License: N/A, Created: 2018:09:27 17:15:52

Photo: N/A, License: N/A, Created: 2018:09:27 17:06:53

Kleinman

by Keith Kleinman

Are you a glass-half-full kind of person? There’s something to be said for being an optimist. However, it’s important to also be a realist, especially when it comes to your retirement. Regardless of how long it will be until you retire, if you simply assume that you’ll have enough money when the time comes instead of planning ahead, you could be in for a big surprise.

A scary thought

Running out of money in retirement is a big concern. But it happens. One reason is longer life expectancies. Your retirement could last 20 or 30 years or longer. If you haven’t planned for that possibility, you could outlive your savings.

Lifestyle also plays a role. Some people are satisfied living a simple, financially conservative retirement. But if you hope to spend freely on travel and other expenses, you’ll need a bigger pot of savings. And don’t forget to include health care expenses in your retirement spending estimates.

A proactive plan

To avoid outliving your retirement assets, consider starting as early as you can to save as much as you can in your retirement savings account. If you have decades to go before you start tapping into your savings, time is on your side. Steady saving over a long period should allow you to build a healthy nest egg.

If you have years instead of decades to beef up your savings, you can help your cause by increasing the amount you’re contributing to your plan. And if you’re very close to retirement age, you might want to consider working for a few more years so you can continue building up your savings and delay taking distributions.

Wherever you are in your career, contributing as much as you can to your plan now may help you avoid outliving your savings later.

Your situation is unique, so be sure to consult a professional before taking action.

Early retirement offer? Look at all sides

Early retirement may sound like a great idea, but be sure you consider the potential ramifications before you agree to accept an early retirement incentive.

Early retirement incentive. How do you feel when you hear those words? On one hand, you may be happy at the prospect of a life of leisure or a new career. On the other, you may have counted on working at your current company for several more years. If “conflicted” sums up your feelings, take some time to sort out the issues.

Is there really a choice?

Although an early retirement incentive may be presented as optional, think about what’s happening with your employer. Companies sometimes offer retirement incentives as a way to eliminate jobs and reduce the workforce. Find out as much as you can about the company’s direction and your future role. Accepting an early retirement offer could be the right move if reassignment, demotion or job loss might be in your future.

Are you financially prepared?

If you were counting on working for several more years, taking retirement early could be a huge financial blow. Not only will you have fewer years to build your nest egg and benefit from any employer matching contributions, but you also may have to tap your retirement savings much sooner than you expected, potentially leaving you with a shortfall in later years. And pension and Social Security benefits could be permanently reduced if you’re forced to take them early.

Are you psychologically ready?

Your work environment may provide you with structure, a sense of achievement and self-worth, and a social network -- all things that you may not be ready to give up. If early retirement is optional, don’t say yes to an offer until you’ve considered all the intangibles. The decision to retire should also include specific plans for how you’ll spend your leisure time.

Got health insurance?

Your employer may include health coverage as part of your severance package. Alternatively, you may have access to health insurance through your spouse.

Don’t sign yet

Before you agree to an early retirement incentive, get all the details of your severance package in writing. Your financial professional can help you evaluate the offer in light of your personal situation.

Contact the author: Janney Montgomery Scott LLC, 270 Pierce Street, Kingston, PA, 18704; 570-283-8140; janney.com. Janney Montgomery Scott LLC is a member NYSE, FINRA, SIPC Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Prepared by DST Systems, Inc. Copyright 2018.