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Keep a Paycheck in Your Retirement Plans

If you are in life stage: Fending Off Retirement Posted May 29th, 2013
By Kathryn Sollmann

Some people plan to retire fully, never utter the word “work” again and live off earnings from a long career. There are, after all, lots of ways to be productive in retirement without earning a paycheck—but with few exceptions, everyone can benefit from some extra cushioning in their retirement accounts. It’s just a fact that no amount of careful planning can fund every unexpected life twist and turn.

If you’ve been a particularly good saver and investor, it’s easy to become complacent, thinking you’ve got the funds for a long string of rainy days. But an eye-opening LearnVest article points to an Ameriprise Financial survey that shows how unexpected misfortunes can turn your long-term financial security upside down.

Ameriprise surveyed people in their 50s, 60s and 70s with at least $100,000 in savings and investments. They found that 90% of those surveyed took at least one unexpected hit to their retirement savings–for an average loss of $117,000. And nearly 40% reported five or more hits, bringing their average total loss up to $144,000. For many, $144,000 represents a large percentage of a retirement nest egg. And there’s the “what could have been” loss: with compound interest the $144,000 would have grown significantly over time .

All the retirement savings worksheets we labor over are focused more on anticipated expenses. There is no way to know what unanticipated expenses we all might face—from the mundane (a new septic tank) to the debilitating (medical expenses not covered by insurance). Despite all our best efforts to plan and save, there will always be curve balls (like perennial house problems with price tags that include at least three eye-popping zeros).

To play it safe, it’s a good idea to maintain a puritan work ethic for at least some of your retirement days. If you are healthy and able, some form of work can keep money flowing in. Even a low-paying part-time job—just one day a week—could more than cover at least one unexpected hit to the money you need to last for two decades or more. —KAS

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