A Late Retirement May be a Richer One

You may have to work longer and save more

If you’re shopping around online for quick cash to tide you over until payday, retirement is probably the farthest thing from your mind. Emergency loans may get you through for now, but sooner or later, you’ll have to face up to your retirement prospects.

With home equities evaporating and many 401(k)s and IRAs down 40% or more, many people are being forced to put retirement plans on hold. Savvy investors with dreams of early retirement are resigning themselves to longer tenures in the workforce; others are struggling with the fear that they may never be able to retire. But the outlook may not be entirely bleak.

If you’re young, there’s still hope

If you’re in your 40s or younger, the disaster that has become our economy may actually work in your favor. Conspicuous consumption is on the wane and right now you can buy into the stock market at a relatively low point. With 20 or so years ahead of you before the traditional retirement age of 65, there’s still time to recoup your losses and build up wealth

If you’re not so young, there’s still hope

If you’re in your 50s, time is not on your side and you may not be able to retire as lavishly as you had hoped. But if you’ve owned your home a long time, you may still have plenty of equity. And the retirement catch-up provisions of the tax code may help you out. Talk to a tax professional about making extra pretax contributions to your retirement accounts.

The upside of the economy

The upside of the economic downturn may be a shift away from competitive spending and a return to more realistic values. No one knows when an economic recovery will come around or how strong it will be when it gets here. But according to some experts, this may be a good time to start investing.

In this economy it has become easier to save. Big-ticket items like housing, autos, and travel are considerably less expensive today than they were a year ago, and “keeping up with the Joneses” is fast becoming unfashionable. Mortgage rates are low right now, and refinancing your mortgage might allow you to pay down any high-interest-rate debt you have.

The downside of retirement

Dr. Ken Dychtwald is a psychologist, a gerontologist, and the founder of a company called Age Wave that caters to the maturing American workforce. There is, Dychtwald says, “medical evidence that working in retirement is good for your health and that early retirement can be harmful — particularly if retirement means a more sedentary and less intellectually stimulating lifestyle.”

“The bottom line,” Dychtwald continues, “is that extending your work life has its benefits, even if the decision to do so has been made out of necessity. Moreover, most folks are at or near their peak earning power in their sixties, and they don’t have nearly as many expenses — kids are out of college, mortgage is paid off, etc. — as they did when they were in their forties. As a result, it’s usually easier to rebuild savings in your sixties than in your forties.”